EPM Q1 2027 earnings call transcript, November 11, 2026

Play will be available in the Investors section of our website. With that, I will turn the call over to Kelly.

on these mineral and royalty interests. That means growth in these assets contributes high margin cash flow without the capex associated with working interest development. As these contributions continue to build, it gives us more capacity to strengthen the balance sheet and further support our dividend. Specifically in the Permian, from the effective date of August 20th through September, production averaged approximately 218 barrels of oil equivalent per day, ahead of the 200 to 210 BOE per day we expected. We have sufficient production data to include the results from 21 of the approximately 27 gross wells that operators brought online between closing and September 30th. That September rate does not yet include production from those roughly six additional wells that we know are online. In our fiscal second quarter, we expect to benefit from a full quarter of ownership, production from those six wells, and production from new wells that come online during the quarter. It's exciting to see this level of activity so soon after closing. Our Louisiana interests offer a similar opportunity. Production from our Haynesville and Bossier royalty interest grew approximately 92% from the fourth quarter as operators brought new wells online. Very much in line with our expectations. We added a couple of small bolt-ons during the quarter and have continued adding to the position since quarter end. We've been building this position over time and we are now seeing this acreage begin to contribute in a meaningful way. We are also looking beyond new production for ways to realize value.

within the portfolio. We own a great deal of undeveloped acreage with meaningful long-term potential. Like we did in the fourth fiscal quarter when we sold minerals for three million dollars that we felt were unlikely to be developed in the next year or two, we always consider the best path to bring value forward to today across our portfolio. Whether that's participating in development through working interest, selling longer-term development prospects, or farming out the acreage to a partner, we have many ways to accelerate value. In the right situations and where the operators aligned with us, a farm out of working interest with an override and or an option to participate can be the most efficient option. It allows us to bring in cash today and retain an interest in future production with zero capex net to us. Following quarter in, we did farm out some undeveloped acreage in the Williston Basin for approximately $2.5 million while retaining a quarter percent overriding royalty interest. This acreage represents roughly 2% of our roughly 40,000 acre position and just a fraction of the 300 plus probable and possible drilling locations that we have identified. We're also in negotiations for further farm outs, a very low or not currently producing acreage here and in other parts of our portfolio that we hope to be able to report on soon. These agreements are expected to generate cash up front and overrides and possible options to participate and we intend to apply these proceeds to pay down borrowings on our revolver. That gives us a way to

reduce debt while keeping today's production and cash flow fully intact. We expect to find more opportunities like these as we work to strengthen the balance sheet and create value for our shareholders while maintaining future upside. Taken together, these opportunities shape how we're allocating capital. We've already invested in assets that can contribute more as they develop, and our near-term priority is to realize those returns in the quarters and years ahead. With meaningful growth already built into the portfolio, we can be highly selective about new capital and put more of the cash we generate towards strengthening the balance sheet. That approach... ...also supports our dividend. The board has declared a quarterly dividend of 12 cents per share, our 53rd consecutive quarterly payment, and since December 2013, we've returned approximately $156.6 million to shareholders. We think about that commitment over multiple years and across... ...commodity cycles, and the growth underway in our mineral and royalty portfolio strengthens our ability to support it. For fiscal 2007, we're off to a start that really reflects the portfolio we've been building. New production from our permanent Louisiana interest, value emerging from undeveloped acreage, and a clear path to... ...stronger cash generation. We look forward to updating you on that progress next quarter. With that, I'll turn the call over to Mark for more details on our operations.

Good morning, everyone. I'll focus on the development activity and operating performance across our portfolio and what we see as we move through fiscal 2027. Overall, first quarter operating performance was up sequentially. Underneath that, the picture varies by area, so let me take them in turn, starting with scoop stack. At scoop stack, new well activity continued across both our working interest and mineral and royalty positions. During the quarter, two gross wells came out. Eight gross wells were in progress, and we elected to participate in three additional gross wells. In Louisiana, new wells continued to come online across our Haynesville and Bossier mineral and royalty interests. During the quarter, we acquired approximately $300,000 of additional interest, primarily in undeveloped acreage that third-party operators are actively developing. That activity continues to build our production without requiring us to fund drilling or completion costs. In a Permian, integration is progressing well. As Kelly mentioned, operators moved at least 21 gross wells into producing status between closing and September 30th. With additional wells entering production and a full quarter of ownership, we expect a larger contribution in the second quarter. For now, our Permian and Louisiana volumes are reported within Tex-Mex and other, and as they become more established in our reporting, we plan to present their contributions separately.

At Tex-Mex, operating costs declined compared to the year-ago quarter following the change of operator. In the Barnett Shell, we have met with the new operator whose entire focus is solely on Barnett operations and improving field profitability through operating changes and workover opportunities. At Delhi, oil production was affected by the new operator. continued compressor downtime during the quarter. Finally, at Chavarou, we continue to work with our partner on the timing of future drilling. We view the development inventory as attractive, particularly in the current price environment, and we'll provide updates as plans develop. With that, I will turn it over to Ryan.

As Brandy mentioned earlier, we issued our earnings release yesterday, which contains more information on our results. For today, I'd like to go through our fiscal first quarter financial highlights. In fiscal Q1, production averaged 6,978 BOE per day, up 1% sequentially and down 5% year-over-year. The lower year-over-year production was due to unplanned downtime at our Delhi and Tex-Mex assets, as well as national declines across the portfolio. In addition, the prior year period includes flush production from wells brought online at Chavarou Field. These declines were partially offset by development in our scoop stack asset, as well as mineral and royalty acquisitions in the Haynesville, Bossier Sale, and Permian. Total revenues were $22.6 million, down 7% sequentially, and up 6% year-over-year. The sequential decrease reflected lower realized oil and NGL prices, partially offset by higher natural gas realizations and increased production. Compared to the year-ago quarter, average realized prices before hedge settlements increased 11%, more than offsetting the decline in production. Net loss for the quarter was $3 million, or $0.08 per diluted share, compared to net income of $4.6 million. in fiscal Q4, and net income of $0.8 million, or $0.02 per diluted share, in the year-ago period. The quarter included a $4.1 million unrealized loss on derivative contracts, compared to a $5.8 million unrealized gain in fiscal Q4. Excluding selected items, adjusted

net loss narrowed to $0.3 million from $0.6 million sequentially, compared to an adjusted net loss of $0.1 million a year ago. Adjusted EBITDA increased sequentially to $6.8 million, driven by lower operating costs as a result of increased mineral and royalty production that helped offset lower operating costs. Compared to the prior year quarter, adjusted EBITDA declined from $7.3 million, primarily due to lower production and lower realized natural gas prices, compared to the prior year period. Lease operating costs decreased to $12.4 million, compared to $13.1 million in the year ago quarter. The decrease was primarily driven by lower operating costs at Scoopstack and at Tex-Mex following the changes of operator, as well as lower taxes and gathering and transportation costs associated with decreased natural gas prices at Jonah and Barnett. On a per-unit basis, LOE per BOE improved approximately 1% from the year ago quarter and improved approximately 5%. sequentially to $19.25 for $20.35 in fiscal Q4. On the hedging front, we have continued to add hedges to comply with our credit facility covenants. Our ongoing goal remains to reduce 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, but benefit us in other periods and provide more predictable and stable cash flows over time. Currently, we have hedged approximately 73% of expected PDP oil production and 76% of expected PDP oil production.

for the remainder of calendar year 2026. For calendar year 2027, we have hedged approximately 72% of expected PDP oil production and 67% of expected PDP natural gas production. Volumes for 100% of our NGL production and development on our asset base. Remains unhedged to provide upside to commodity pricing. We continue to utilize a mix of swaps and callers to hedge both oil and gas. For the quarter, realized losses on our derivative contracts were $1.3 million compared to realized gains of $0.9 million a year ago. That change reduced adjusted EBITDA. By approximately $2.2 million year-over-year. The volumes and prices by instrument and period are included in the hedge schedule in our earnings release. Turning to the balance sheet, cash on hand totaled $3.1 million at September 30th, down from $6.1 million at June 30th. Borrowings under our credit facility increased during the quarter. to $60 million from $56.5 million as a result of the Permian Minerals acquisition, with $0.8 million in letters of credit outstanding and a weighted average interest rate of 6.48%. Total liquidity at September 30th, including cash and available borrowing capacity, was approximately $15.3 million. We created $8.4 million in operating cash flow before changes in working capital during the quarter, compared to $6.5 million in fiscal Q4. Capital expenditures incurred were $0.7 million, and we completed the $16 million Permian Minerals acquisition. We also received approximately $12.5 million of net proceeds.

From our common stock offering, and had $3.5 million of net borrowings under our credit facility. Subsequent to quarter N, our borrowing base was redetermined at $70 million, down from the interim $73 million borrowing base established in August to provide liquidity to complete the Permian Minerals acquisition, but up from the spring 2026 borrowing base value of $6. $65 million. As of October 20th, availability on its facility was $9.2 million. This does not include approximately $2.5 million in cash received for the closing of the initial Williston farm out transaction in November or any subsequent farm out transactions that we are currently pursuing. During the quarter, we paid $4.9 million in common stock dividends. The Board has declared a quarterly dividend of $0.12 per share for fiscal Q2 2027, payable December 31st to show us a record on December 15th, marking our 53rd consecutive quarterly payment. As we move through fiscal 2027, our financial priorities remain focused on maintaining liquidity, managing leverage, and deploying capital where we expect attractive returns per share. The growing contribution from our recent mineral and royalty investments that don't require any CapEx, combined with expected form-out proceeds, support our focus on reducing borrowings while continuing to return capital to shareholders. I'll now hand it back over to Kelly for closing comments.

As we move through fiscal 27, our focus is on realizing the returns from the portfolio that we have already built. We're encouraged by the early performance of our recent investments and the opportunities ahead, while recognizing that the measure of our progress will be the cash those assets generate for shareholders. We will remain disciplined in how we commit capital with debt reduction and sustaining our quarterly dividend at the forefront of our decisions. We appreciate your continued support of evolution and look forward to updating you on our progress. I just want to say thank you and happy Veterans Day to you.

The first question today comes from. Jeff Gramp with Northland Capital Markets. Please go ahead.

The next question comes from Poe Fratt with Alliance Global Partners. Please go ahead.