Good day, ladies and gentlemen. And welcome to the Evolution Petroleum First Quarter Fiscal Year 2022 Earnings Release Conference Call. At this time, all participants have been placed on a listen-only mode. And the floor will be open questions and comments after presentation. It is now my pleasure to turn the floor over to your host, Ryan Stash, Chief Financial Officer. Sir, the floor is yours.

Thank you, Kate. Good afternoon, everyone. And welcome to Evolution Petroleum's earnings call for our first quarter of fiscal year 2022. Joining us today is Jason Brown, President and Chief Executive Officer; and myself, Ryan Stash, Chief Financial Officer. After I cover the forward-looking statements, Jason will review key highlights along with our operational results. I will then return to provide a more in-depth financial review. Finally, Jason will provide some closing comments before we take your questions. As a reminder, if you wish to listen to a replay of today's call, it will be available by going to the company's website or via recorded replay until December 10, 2021. Please note that any statements and information provided today are time-sensitive and may not be accurate at a later date. Our discussion today will contain forward-looking statements of management's beliefs and assumptions based on currently available information. These forward-looking statements are subject to risks and uncertainties that are listed and described in our filings with the SEC. Actual results may differ materially from those expected. Since detailed numbers are readily available to everyone in yesterday's earnings release, this call will primarily focus on our strategy as well as key operational and financial results and how these affect us going forward. Please note that this conference call is being recorded. I will now turn the call over to Jason.

Thank you, Ryan. Good afternoon, everyone. And thanks for joining us today for Evolution's first quarter fiscal 2022 earnings call. Our first quarter represented another period of strong financial performance and continued cash generation that supports our long-term strategy of operating within cash flow and paying an ongoing meaningful cash dividend to our shareholders, which we've been able to do consistently over the past 8 years. In addition to our financial performance, the team was able to successfully develop and publish our inaugural corporate sustainability report. It can be found on our recently updated website. I'm proud of the work that the team has accomplished in this regard. And would be excited to hear for any feedback that our shareholders would care to give. During the first quarter, we produced 5,843 net BOE per day. That was about 33% higher than the fourth quarter of fiscal 2021. This was primarily due to a full quarter of production from our Barnett Shale assets that were acquired on May 7. I'm pleased with our team who is able to seamlessly integrate the Barnett assets into our systems without any material ongoing G&A additions. We also benefited significantly from higher commodity pricing as we continue to remain unhedged during the first quarter. These factors combined with the efforts of our third-party operators, to leverage efficient field cost structures resulted in an adjusted EBITDA of $8.5 million. This was more than 80% increase from the fourth quarter of last year. We once again generated operating cash flow in excess of capital expenditures, which allowed us to pay our 32nd consecutive quarterly cash dividend. In addition, we were able to grow our cash position to $8 million at quarter end, which is a 51% higher than our cash balance of June 30, 2021. Now looking…

Thanks, Jason. I'll now share some more details regarding our financial results for the first quarter of fiscal 2022. As I mentioned earlier, please refer to our press release from yesterday for additional information and details. And some of the key highlights are, as Jason had just mentioned that we paid our 32nd consecutive quarterly dividend in the first quarter of $0.075, which is a 50% increase over the prior quarter. And as Jason also mentioned, we declared a $0.075 dividend for this upcoming quarter, that's going to be payable on December 31, 2021. Our adjusted EBITDA increased more than 80% to $8.5 million from the fiscal fourth quarter of 2021. And as Jason also mentioned, this is really due to a full quarter of production from the Barnett Shale that closed in May as well as improved commodity prices relative to the prior quarter. We're able to fully benefit from these increased commodity prices due to our strategy to remain unhedged. We funded all operations, development, CapEx and dividends out of operating cash flow and maintained our strong balance sheet with $8 million of cash on hand and $4 million drawn resulting in a net cash position of $4 million as of September 30. Now we'll say we do expect to pay off this $4 million during this quarter, our fiscal second quarter as we're set to have our final settlement with Tokyo Gas to sell over the Barnett assets we expect that to happen this month. Working capital increased by $4.1 million to $15.6 million this quarter. And this is really due to a lag in revenue receipts and invoices from the operator of the assets diversified. So we currently have more months than we would usually expect of revenues and expenses in our receivables and payables. We…

Thanks, Ryan. We're very pleased with the momentum that we've built through the first quarter of fiscal '22. We remain focused on our core values, which include generating cash flow and providing our shareholders with a meaningful return on their investment through cash dividends and executing on additional accretive acquisitions. As I said on our last call, I believe that we've demonstrated our ability to source value and successfully transact on opportunities that support this strategy. And equally important to those activities is the ability to integrate and manage those assets once they're owned. The team has done a great job with this, which only increases our confidence in the outlook of our organization, supporting our efforts of providing shareholders with an ongoing cash return on their investment is our commitment to continuing sustainable business practices. As I mentioned earlier last week, we released our auto Corporate Sustainability Report. And while we currently do not operate into the assets in which we have ownership interest, we view our environmental, social and governance or ESG programs and initiatives is key to our strategy to further differentiate evolution both now and in the future. ESG will be a consideration as we evaluate future accretive opportunities to grow our asset base and reserves. Following our Barnett Shale acquisition, we remain eager to continue to grow in both in size and scale and feel that we're well positioned to execute on the right opportunities for our business. We continue to source and assess a wide variety of marketed and negotiated transactions. We're optimistic that we will be able to grow our business and provide additional shareholder value through targeted expansion of opportunities in fiscal '22. With that, I think we're ready to take questions. Operator, if you'll please open the line for questions. Thank you.

Thank you, operator. Good afternoon, Jason and Ryan. I was really glad to see the strong results all the way around. And congratulations on the increased borrowing base. So some of the Hamilton Dome workovers were included in LOE. Are there more of those coming in the next quarter or so?

During -- those guys are really sharp during 2020, they basically pulled it down to hardly anything. There's not really any new drilling going on up there or no new capital project. So those workers there are more expense workovers things that down pumps that sort of deal. There's a few items that are wells that they took off production immediately about 40%. And over the last year, they've pulled things back on. This last set was now the final saltwater injector well that they were able to turn back on. So we would consider this quarter to be high. There may be a little bit more in the next quarter. There are consistently some workovers from time to time there just in pumps going down or whatnot normal maintenance. It was extra than what we expect for two reasons. One, to kind of make up some things that they had been putting off in lower price environments. And two, to get that fourth injector up, which is going to allow more water to be injected around the field. So the short answer is yes, maybe a little bit more it was higher than normal. But I think that put our lifting cost up to about $40 a barrel. We would anticipate that that's going to ease back to the low 30s. I think we're in the $31.50 before and maybe even better than that, more of an ongoing thing. Although the next quarter it might be slightly somewhere in the middle. Does that make sense, John?

Yes, it does. Thanks for that. And boy that natural gas out of the Barnett sure has a positive effect on LO . You mentioned one saltwater disposal well as planned. And you said Diversified is still finalizing their plans. Are you getting any kind of informal indication of workovers at the Barnett?

No. I think they're finalizing their transition services agreement with Black Bear this month. So we would anticipate being able to have that -- we just -- we didn't -- weren't able to have a formal meeting with them before this call. But we anticipate that over the next few weeks. No, we just actually get an AFP from them, which we were pretty surprised to have and excited about. It’s not the drilling of the new saltwater disposal well, it’s the reactivation of one that would then in turn allowed us well that we’re previously producing. I think these four wells that we’re making about 450 a day. So that’s just gas that we’re not going to make. So it’s those types of activities we anticipate quite a bit of. But I will say we also got an AFP on a new drill well out there John. This is one of the minor -- we have some other assets there that I think we have about 1.25% interest. It’s a small piece that are operated by few other operators diversifies the main operator for. And so this is one of the other ones. So it wasn’t a significant thing for them. But there are people stemming up rigs in the Barnett which is interest to see as well. At some point some of those locations might be a value to us. So we’re going to be looking at that over the next quarter as well.

Very good. Looks like the acquisitions working out very well for you. And I’ll pass it on.

Thanks, John.

Thank you. Our next question today is coming from Erik Volfing at Grand Slam. Your line is live. You may begin.

Hi, guys. Congratulations on a very nice quarter and really congratulations on having made such a good acquisition with the Barnett Shale. You mentioned that you’re starting to look towards the final settlement with Tokyo Gas. What’s involved in that?

So yeah. If you recall, it took us a lot to get the deal over the finish line with kind of working with the Japanese counterparty. But the actual -- so the effective date of the transaction I think we talked about this before was January 1 of this year. So when we closed in May, we receive the portion of what Tokyo Gas have received which is a couple of months' worth of cash flow in May. And we expect to receive the remainder of kind of those cash flows between call it March and May when we closed finally. But there is actually probably even a little bit more as it’s taken -- it took the prior operator block period a while to get things transitioned over. So there is a decent amount that we will probably expect to receive when we close here on the final settlement which is basically truing up every -- all the revenue that they received from January 1 to now.

So, so we’re basically expecting those to be a positive. It’s not that you owe them anymore money. It’s them pay you extra money?

Correct.

Okay. And there were also -- I think there were few wells that they had that didn’t immediately transferred because there were some question about -- I think whether somebody had a right of first refusal. Is any of that still -- is that maybe that be part of this or is that just completely dead?

I think we should assume at this point that it’s dead. We’re certainly open to it. That was actually not a right of first refusal, there was a lawsuit and it was backed off because the operator was also selling to diversify. They chose to just go ahead and close despite of the lawsuit. So we kind of stayed away from that. If it got remedied, we would be fined from like run of it. But I think also we have the complication of them probably want to go whole lot more forward. So I’m not sure that we would buy it at this point. But I think safe to assume at this point, let’s not -- and if it comes back around at some point will pretty clear we would probably take a swing at it.

Okay. And obviously you’re generating a tremendous amount of cash. And it looks like you’re going to generate some more cash here from -- I guess from this final settlement. So some of it will go to pay off I guess that $4 million that you have. I was actually little bit surprised that the board chose not to increase the dividend at this time considering the amount of cash that you have. And then looking out just a couple of quarters, you could be all the way back to the amount of cash you had before the last acquisition, probably by the end of June, if prices stay up here. Any thoughts on sort of what the board's thinking is there?

Well, it's a pretty thoughtful board and has the reputation long earned from being very fiscally disciplined and prudent. So I think what you're feeling here is a real reticence to go too aggressive to raise the dividend not wanting to lower it again. We feel like the reputation is really built around. We pay our dividend. We've only lowered it twice during -- in 2014 when commodity prices collapsed and then in 2020 when they did as well each time kind of measuredly moving forward. So I think what we're seeing there, of course, we could have went right back to our $0.10. But we're certainly feeling more comfortable about the stability of overall economic environment and COVID situation and our cash flows and everything else. But there's been quite a bit of volatility in the last 12 months. And I think -- have a little bit more runway, I guess,

I mean I would just add real quick. I mean when we had discussions on dividend policy. I mean, we look 5-plus years out. And so if you're looking at years 4 and 5, as you probably know, the strip is highly backward dated. So things look a little different. And so as Jason alluded to, I mean, we're setting a dividend rate for the long-term. And so while we could have raised it, we felt being more prudent given kind of the backwardation in prices. And, quite frankly keeping some powder available as acquisition opportunities that we see.

Okay. And I guess, actually, that sort of leads to my last question if I may. Just kind of on the acquisition front, with the big run we've had on commodity prices. Is that making it harder to source deals?

Well, what he just know definitely not to source deals. There's a ton of deals out on the market, some of them with unrealistic expectations. The thing that's interesting is what Ryan just said, though, is that the strip is pretty backward dated. Now we're fairly bullish on long-term prices, but the market, in general, is pricing quite a bit of uncertainty evidenced by the backwardation, meaning that, prices are pretty high right now. But a couple of years out gas is back to $3, oil is back to $55 or whatever it is. I mean it's pretty quickly. The interesting thing that, that is almost enabling though, if is transactions to actually happen because people can get closer to strip pricing for their assets and people buying them, if you're reasonably confident about the future curve you might be willing to pay closer to strip because the strip is so backward dated. For us, we're looking for that long tail. We're looking for barrels 5-7-10 years out there. And those things are getting priced way down right now. If that makes sense. So -- and we're pretty hopeful like I said in there. And I think your -- Ryan's right. We're also pretty hopeful we'll be able to transact in the next few months on something else that will support the dividend.

Excellent. Thanks, again.

Thank you. We have no further questions in queue at this time. I will now turn the floor back over to management for any closing comments.

Well, thanks again. Thanks for your participation today. And feel free to contact us if you have any other questions or comments. We appreciate the continued support from our shareholders and look forward to providing everyone with further updates on our business and potential targeted growth opportunities on our second quarter fiscal ‘22 earnings call that will be in early February. Thank you.

Thank you. Ladies and gentlemen, this does conclude today's event. You may disconnect at this time, and have a wonderful day. We thank you for your participation.