Evolution Petroleum Corporation revealed on March 4, 2025, the signing of a definitive agreement to acquire non-operated oil and natural gas assets in Texas, Louisiana, and New Mexico. The acquisition totals $9 million, subject to adjustments at closing, and is expected to be finalised by the end of the third quarter of fiscal year 2025, with an effective date of February 1, 2025. The transaction will be financed through a combination of available cash and borrowings under the company’s existing credit facility.
Nature and characteristics of the acquired assets
The acquired assets include approximately 440 barrels of oil equivalent per day (BOEPD) of net production, consisting of 60% oil and 40% natural gas. These properties are primarily proven developed producing (PDP) assets with low decline, characterised by an annual production decline of less than 7%. This low annual decline ensures stable cash flows and long-term value creation. The transaction is immediately accretive to all key metrics, enhancing the company’s ability to maintain and grow returns for its shareholders. The acquisition includes approximately 254 producing wells across the three regions, operated by a leading private operator, ensuring optimal operational efficiency.
A disciplined growth strategy acquisition
Kelly Loyd, President and CEO of Evolution Petroleum, emphasised that this acquisition marks the seventh such transaction in six years and aligns perfectly with the company’s disciplined growth strategy. He stated that these assets add high-quality, low-decline production at an attractive valuation, estimated at approximately 2.8x adjusted EBITDA for the next twelve months (NTM). “These assets complement our current portfolio and enhance our ability to generate stable cash flows, thereby supporting our long-standing commitment to returning capital to shareholders,” he added.
Favourable valuation and growth opportunities
The acquisition also provides Evolution Petroleum with low-risk development opportunities, particularly through the reactivation of certain existing flooded fields and operational efficiencies. These initiatives offer growth potential for production while enhancing long-term returns. The company expects the transaction to generate incremental cash flow immediately upon closing and to highlight opportunities for short-term profitability improvements.
Strong financial metrics
The company estimates that the transaction will result in immediate accretion, with a valuation estimated at 2.8x adjusted EBITDA for the next twelve months. The acquisition also includes an estimated present value of proved reserves (PV-10) of approximately $15 million. This EBITDA multiple is a key indicator that underscores the strength of the transaction, excluding the incremental cash flow generated from future development opportunities.
Evolution Petroleum continues to execute its long-term production asset acquisition strategy, within a business model aimed at maximising financial returns while maintaining a disciplined financial approach. The company highlights its ability to finance this acquisition while maintaining a strong market position.
