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Earnings call: Evolution Petroleum maintains dividend, eyes expansion

Published 2024/09/11, 21:18
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EPM
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Evolution Petroleum (NYSE:EPM) reported its fiscal year 2024 financial results, emphasizing its continued commitment to shareholder returns and strategic expansion despite the lowest natural gas prices since the COVID-19 pandemic.


The company announced $86 million in revenue, $4 million in net income, and $30 million in adjusted EBITDA. With significant additions to its drilling inventory and the declaration of its 44th consecutive quarterly cash dividend of $0.12 per share, Evolution Petroleum navigates market volatility with a focus on disciplined capital management and growth in high-return areas.


Key Takeaways


  • Evolution Petroleum reported $86 million in revenue, $4 million in net income, and $30 million in adjusted EBITDA for fiscal year 2024.
  • The company added 6.6 million barrels of oil equivalent in proved reserves from acquisitions in SCOOP/STACK and Chaveroo.
  • A record in liquids production and revenue was achieved, with plans for further drilling in fiscal 2025.
  • A cash dividend of $0.12 per share was declared, marking the 44th consecutive quarterly dividend.
  • Capital expenditures for fiscal 2025 are projected to range from $12.5 million to $14.5 million.


Company Outlook


  • Evolution Petroleum plans to diversify its portfolio and stabilize operational costs while increasing production efficiency.
  • The company aims for record levels of liquid revenue and production in a challenging natural gas market.
  • Capital expenditures for fiscal 2025 are estimated to be between $12.5 million and $14.5 million, with drilling activities set to commence in fiscal Q2 2025.


Bearish Highlights


  • The company faced the lowest natural gas prices since the COVID-19 pandemic.
  • Production at the Delhi field was down 20% quarter-over-quarter due to reduced CO2 injections.


Bullish Highlights


  • Evolution Petroleum expanded its drilling inventory, adding over 300 locations in SCOOP/STACK and 80 in Chaveroo.
  • The company is actively adding hedges to protect against commodity price risks while maximizing upside potential.
  • Management is confident in maintaining liquidity and exploring potential acquisitions with a stable borrowing base.


Misses


  • Despite the overall decrease in lease operating expenses, there were specific increases due to reduced CO2 purchases at Delhi and initial production setup at Chaveroo.


Q&A Highlights


  • The company addressed its strategy for financing potential acquisitions, preferring a mix of expanding their credit facility and raising equity if an accretive deal arises.
  • Management discussed the stable borrowing base of their Asset-Based Lending (ABL) and noted the recent reduction in outstanding debt from $42.5 million to $39.5 million.


In the face of a challenging natural gas market, Evolution Petroleum has maintained a steady course, focusing on disciplined capital management and strategic expansion. With a clear plan for the upcoming fiscal year, including targeted drilling activities and a stable financial position, the company is poised to continue its record of delivering shareholder returns and managing operational efficiency.


InvestingPro Insights


Evolution Petroleum's financial performance in fiscal year 2024, highlighted by $86 million in revenue and a steadfast commitment to shareholder dividends, is further illuminated by real-time data and insights from InvestingPro. The company's dedication to maintaining dividends is underscored by an impressive dividend yield of 10.34%, as of June 2024, which is a testament to its focus on shareholder returns.


InvestingPro Tips reveal that Evolution Petroleum has not only maintained its dividend payments for 12 consecutive years but has also raised its dividend for three consecutive years, showcasing a consistent approach to rewarding its investors. Additionally, the company operates with a moderate level of debt, which may provide financial flexibility in navigating market fluctuations and pursuing strategic growth opportunities.


The InvestingPro Data metrics offer a mixed view of the company's recent financial performance. While revenue for the last twelve months as of Q4 2024 has seen a significant decline of 33.18%, the gross profit margin remains relatively healthy at 43.79%. This suggests that despite revenue headwinds, the company is managing to maintain profitability in its operations. Furthermore, the quarterly revenue growth of 16.8% in Q4 2024 indicates a potential rebound or seasonal strength in the company's business.


Investors seeking further insights can find additional InvestingPro Tips for Evolution Petroleum at https://www.investing.com/pro/EPM, which may provide a deeper understanding of the company's financial health and future outlook.



Full transcript - Evolution Petroleum Corp Inc (EPM) Q4 2024:


Operator: Good morning, and welcome to the Evolution Petroleum Fourth Quarter and Fiscal Year 2024 Earnings Release Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, today’s event is being recorded. I'd now like to turn the conference over to Brandi Hudson (NYSE:HUD), Investor Relations Manager. Please go ahead.


Brandi Hudson: Thank you. Welcome to Evolution Petroleum's fiscal Q4 2024 earnings call. I'm joined by Kelly Loyd, President and Chief Executive Officer; Mark Bunch, Chief Operating Officer; and Ryan Stash, Senior Vice President, Chief Financial Officer and Treasurer. We released our fiscal fourth quarter and full year 2024 financial results after the market closed yesterday. Please refer to our earnings press release for additional information containing these results. You can access our earnings release in the Investors section of our website. Please note that any statements and information provided in today's call speak only as of today's date, September 11, 2024, and any time-sensitive information 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 the risks, assumptions and uncertainties as described in our SEC filings. Actual results may differ materially from those expected. We undertake no obligation to update any forward-looking statement. During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA. Reconciliations of these measures to the closest comparable GAAP measures can be found in our earnings release. Kelly will begin today's call with some opening comments. Mark will provide an update on our properties and plans as they relate to our ongoing strategy of maximizing shareholder returns. And Ryan will provide a brief overview of our fiscal quarter highlights. After our prepared remarks, the management team will be available to answer any questions. As a reminder, this conference call is being recorded. If you wish to listen to a webcast replay of today's call, it will be available on the Investors section of our website. With that, I will turn the call over to Kelly.


Kelly Loyd: Thank you, Brandi, and good morning, everyone. Following our record year of natural gas production and revenue in fiscal 2023, this fiscal year has proven that adaptability is key. In the face of volatile natural gas prices this year, we understood the importance of balancing our portfolio while simultaneously positioning ourselves for future growth. As a result, we generated record liquids revenue in production for this fiscal year, in part driven by 2 transformative transactions with SCOOP/STACK and Chaveroo that added 6.6 million barrels of oil equivalent of proved reserves, with the majority of the locations yet to be booked. With these transactions, we expect fiscal year 2025 liquids production to be very strong and bolster our cash flow for years to come, building upon our multi year track record of executing strategic investments for the benefits of our shareholders. I'd like to start today's call by highlighting key operational achievements for fiscal 2024. This year, we significantly expanded our drilling inventory, adding over 300 locations in the SCOOP/STACK region, 80 plus locations at Chaveroo, as well as three initial drilling sites within Test Site V at Delhi. Our efforts in the SCOOP/STACK in Chaveroo are especially noteworthy as we believe both assets provide us with exposure to highly economic and durable locations. We participated in 22 wells at SCOOP/STACK, many of which are performing well above our initial expectations, generating both higher returns and stronger production than our original type curves predicted. Similarly, in Chaveroo, we drilled our first three horizontal San Andres wells with early results exceeding our estimates. These wells are a testament to our strategic focus on efficient high return growth opportunities. At Delhi, we have initiated development of Test Site V in collaboration with ExxonMobil (NYSE:XOM), aiming to drill the first of an initial three wells by calendar year end. As we have stated, throughout this fiscal year following Exxon's acquisition of Denbury, we believe their priorities for the asset are well-aligned with evolutions. This initial development further validates our expectations. I'm also pleased to announce that Delhi has been certified as a carbon capture, utilization and storage site for enhanced oil recovery, which we believe will drive further benefits to evolution. All said, in fiscal 2024 we generated $86 million of revenue, $4 million of net income and $30 million of adjusted EBITDA. Meanwhile, our disciplined capital allocation approach has allowed us to remain within our targeted leverage ratios with no incremental dilution, despite executing key strategic investments during the year. All of this was accomplished while facing the lowest natural gas price environment we've seen since the COVID-19 pandemic. Consistently generating cash flow remains a core tenet of our strategy as it supports evolutions continued return of capital to shareholders via dividends. We are very proud to have consistently paid dividends for over a decade and this quarter, I'm pleased to announce that we will pay another $0.12 dividend in September, marking our 44th consecutive quarterly dividend payment. As I have often stated, our dividend strategy is supported by our diverse low decline assets that require minimal CapEx. The diversification of our portfolio and low maintenance requirements of our assets provides us with the confidence in sustaining our dividend program for years to come. Even in the face of fluctuating commodity prices. And with the recent additions of SCOOP/STACK in Chaveroo, we have further extended the runway for our dividend program. As we look to the future, our focus remains on creating long-term value for our shareholders. We are committed to maximizing total shareholder returns through efficient, diligent capital management and deployment. For our current asset base, our strategy is simple. Continue expanding in high return regions, focus on disciplined cost management, and ensure that every decision we make supports our dividend program. We have built a strong portfolio of assets that balance oil and natural gas production, positioning us well for various market conditions. We will also continue to evaluate additional M&A opportunities as well as investment within our current asset base to drive further organic growth. We've proven that we can execute on both fronts and we will continue to pursue what is best for our shareholders. I want to thank our team for their hard work and dedication and of course thank all of you, our shareholders for your continued support. We're excited about the future of Evolution Petroleum and believe we are well-positioned to deliver sustainable growth and strong returns in the years to come. With that, I'll turn the call over to our COO, Mark Bunch to review our operations in more detail. Mark?


Mark Bunch: Thank you, Kelly, and good morning, everyone. I will focus my remarks on key operational highlights from the quarter and encourage listeners to review our earnings press release and filings for additional details across our asset base. During the quarter, our operators turned-in-line 3 gross wells in SCOOP/STACK with 10 additional gross wells currently in progress. And as of today, 7 of these 10 wells are currently producing. Additionally, we have agreed to participate in 3 gross new horizontal wells across the acreage. From the effective date through June 30, 22 gross wells were converted to Proved Developed Producing. Overall, actual production has exceeded our original forecasted production at the time of acquisition by approximately 20%. In the Chaveroo oilfield, we drilled and completed 3 wells that were turned-in-line on February 1. While the wells cost more than expected to drill and complete due to unusually high fluid losses, we're quite happy with the results as the EURs are approximately 20% higher than our original expectations. In fiscal 2025, we plan to participate for our full 50% working interest share in 4 horizontal well locations in Drilling Block 2. These operations are expected to begin in early fiscal Q2, 2025. We have preliminarily agreed to 6 additional horizontal well locations in Drilling Block 3 that are estimated to begin in fiscal Q4, 2025. We also purchased drilling blocks 45 in advance, bringing the total number of PUD locations to 18 at Chaveroo. We expect to systematically participate in future development blocks. Future net acreage costs are fixed at $36,000 per additional horizontal well. Williston basin production increased during the fiscal quarter due to a full quarter of natural gas and NGL sales from the ONEOK (NYSE:OKE) Grassland System, which came back online during the prior quarter. At Delhi, production was affected during the quarter by field wide power outages for 7 days, combined with downtime from one of the CO2 recycle compressors in May, which reduced CO2 injection volumes for most of the quarter. The compressor was replaced and full CO2 recycling resumed in July. The CO2 purchase pipeline was taken offline for preventative maintenance at the end of February 2024 and remained down throughout this quarter. The operator anticipates resuming CO2 purchases in early second quarter of fiscal 2025. All said, our fiscal fourth quarter production was up 11% year-over-year to 7,209 net BOE per day, with oil increasing 20%, natural gas up 5% and NGLs up 17% compared to a year ago quarter. Our strong drilling results and the contribution from acquisitions more than offset natural gas price declines and downtime related to maintenance. With that, I will turn the call over to our CFO, Ryan Stash, to review our financials in more detail. Ryan?


Ryan Stash: Thank you, Mark, and good morning, everyone. As Brandi mentioned earlier, we released our earnings yesterday, which contains more information on our results. My comments will focus mainly on the highlights of the fiscal fourth quarter. In fiscal Q4, we had total revenues of $21.2 million, up 17% year-over-year. The improvement was driven largely by an increase in oil and natural gas liquids revenue, partially offset by lower natural gas revenue driven by historically low pricing. Net income for the fourth quarter increased to $1.2 million compared to the year ago quarter and adjusted EBITDA increased 12% to $8 million, primarily due to increased revenue and reduced operating costs. Cash flow from operations also increased materially to $8 million for the quarter compared to cash used to $400,000 in the year ago period. Overall, our financial results demonstrated the resilience and diversification of our asset base. As Kelly mentioned earlier, this year we faced the lowest natural gas pricing environment since the COVID-19 pandemic. However, we continue to generate another quarter and year of positive cash flow from operations while maintaining our multi-year quarterly dividend. On the development side, we spent $2.5 million in CapEx, primarily related to the development in the SCOOP/STACK in Chaveroo fields. We ended the quarter with $6.4 million in cash on hand and borrowings of $39.5 million on our credit facility. During the quarter, we received cash payments totaling $5 million related to purchase price reductions from the SCOOP/STACK properties for net cash flows received during the period between the effective date of November 1, 2023 and the closing date. We continue to add hedges in order to comply with the terms of our credit facility. Our goal for our hedging program will continue to be to reduce downside commodity price risk while maintaining the maximum amount of upside available. As such, we will continue to monitor the market and may add additional opportunistic hedges. With respect to shareholder return the Board of Directors declared a cash dividend of $0.12 per share of common stock on September 9, 2024, which will be paid on September 30, 2024. This will mark the 44th consecutive quarterly cash dividend and the 9th consecutive dividend at the current price level. To date, evolution has returned approximately $118.4 million or $3.57 per share back to shareholders in common stock dividends. I'll hand it back over to Kelly now for closing comments.


Kelly Loyd: Thanks, Ryan. To sum it up, fiscal '24 was a year of investment for evolution. The reality is that we don't control cyclical commodity prices. We contended with a challenging macro environment for natural gas in 2024 and we responded to this by making key moves to diversify our portfolio and position ourselves to drive record levels of liquid revenue and production in fiscal 2024 and beyond. With that, I'll turn it over to the operator to begin the Q&A session. Thank you very much.


Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Today's first question comes from Donovan Schafer with Northland capital.


Donovan Schafer: Hey, guys, thanks for taking the questions. First, I want to ask about the Test Site V with ExxonMobil that you guys are starting. So can you just remind us where that is in the Delhi field, I think nomenclature is looking at different sources, then it varies and so with some SPE papers and things it talks about like Phases 1, 2, 3, and 4 and so forth and here we are talking Test Site V. Is just kind of down in the Southwest dip or is it up towards Northeast like on the other side of the town that's there or is this going back to recover the area that was isolated with the water curtain just helping me kind of place where this is?


Kelly Loyd: Sure. Hi, Donovan, this is Kelly. I'm going to let Mark get into more detail on that. But quickly, just a couple of things. I apologize for my voice, I've been a little bit under the weather here. So if I sound funny that's why. And just second real quickly on this 9/11 anniversary, I just want to acknowledge the actions of the brave men and women in those hours, months, years after that tragic event and how it makes us, as Americans all feel proud. So, look, with that, Donovan, I'm going to let Mark go ahead and answer this for you.


Mark Bunch: Hey, Donovan, good to hear from you and good question. Probably does need to be updated for everybody. Okay, so Test Site 5 is towards the -- is on the eastern side of the current development, but it's actually really west of the City of Delhi or the excuse me, the town side of Delhi. And so it's just an extension off further towards Delhi -- towards the Town of Delhi.


Donovan Schafer: So not so much as like a whole new phase, but more of an incremental broadening of kind of what existing phases have already been developed?


Mark Bunch: That's correct. It's just tacking on to the current development.


Donovan Schafer: Got it. Okay. And then are there any new developments on or conversations around expanding into more phases because I think those are the things that could be the real kind of big material changes and with the CO2 getting certified for carbon capture and sequestration, are those kind of bigger real needle mover potential things moving forward? Or are they further down in the queue in terms of just even having conversations about them?


Kelly Loyd: The latter, further down in the queue, Donovan. And basically, there's still more running room even potentially in the test in the area that we're talking about, Test Site V. I mean, so it's not like what we're talking about right now is the last thing could be. I mean, a lot of depends upon how the production works out for the wells that are planned to be drilled.


Mark Bunch: Yes. So, hey, Donovan, just a little more color. Previously, your Test Site V was a -- it was a full CO2 flood project with a whole bunch of CapEx associated with it. What they've discovered and what they believe for now is that there has been CO2 that sort of migrated over there and the most efficient, most cost effective, highest return way to do it is to just go ahead and drill producers over there. So we're going to start off with that and then see how many more come from the results on that. High return stuff we're excited about, really.


Donovan Schafer: That makes sense. Okay. So still focusing on Delhi field, production was down material amount in the quarter like 20% quarter-over-quarter and I understand that's because there were no CO2 injections, recycling itself was scaled back quite a bit. So I guess just like at a basic level just for orienting ourselves with everything, all the different moving pieces there at Delhi, would you expect that number to be up quarter-over-quarter in the next quarter or will it stay down or potentially even go lower and as a fall related to that, if you're not inducting CO2 volumes and I know I think fiscal second quarter is when you said that would operators said that would pick up again and the recycling volumes were down. Does that mean you're like on a net basis kind of actually taking CO2 out of the reservoir? And is that causing like a material drop in reservoir pressure? Would that cause any issues in terms of the like carbon capture, sequestration stuff? Can you get a penalty or a fine or anything for that?


Mark Bunch: Okay. So answer your question. On a number of days, one, the recycling is all the way back up to full levels. And yes, it's still less than if we were normally buying CO2. So when you start to buy CO2, we'll get that back up. We do expect that the production will be up. Going forward we kind of look at it as like last quarter doesn't really fit the trend because of the -- because we weren't injecting quite a bit of CO2 that we normally do. And the last time we saw CO2 outage on the -- where we weren't buying, purchased CO2 when we brought this stuff back, when we bought Delhi back on with CO2 purchases, it was actually a significant flattening of the decline. And so we feel like that you look back like the previous quarter and kind of work your way from there would be more realistic as far as like what actually happened reservoir wise, we -- I don't know that they have any particular hard data, but I suspect that we did have. We were creating some voyage in the reservoir. I don't believe that meant that we were producing extra CO2 because one of the things that the operator did was to selectively shut down wells that were high CO2 users and therefore that way it would kind of minimize the effect of reducing injections. So that's kind of a -- that might be kind of a long way to answer your question, but I think you should probably look back to the quarter before last to get an idea of where to start once the CO2 injections are fully back up.


Kelly Loyd: Yes, just to further that Donovan. So Mark, correct me if I'm wrong, I think there were three compressors in the recycle plant and one of them was down.


Mark Bunch: There's four. There's actually four. One of them was down.


Kelly Loyd: Okay. And we're still injecting recycled CO2, just not at the rates that we want to. And as you said, the purchase line was down, still is. We expect that early Q2.


Donovan Schafer: Okay. And then, as just my last question, could we get any -- is there any more clarity or clarification on how the credits from capture sequestration certification, how that would be monetized? In what way for you guys and the timeline on that?


Kelly Loyd: We had a --


Mark Bunch: Go ahead, Kelly.


Kelly Loyd: Okay. We're, yes -- so we're still talking about it? Still working on it. We don't have an exact timeline for when anthropogenic CO2 will begin to be injected, so we still have some time there, but it's -- that's still something we're working on, Don.


Operator: And our next question today comes from John White at ROTH Capital.


John White: Really like seeing all the drilling activity during fiscal fourth quarter and planned activity going forward. I want to give some more details on the SCOOP/STACK of the 10 recent wells. Are there 1 or 2 operators that are dominating that activity and or is it a more diversified list of operators?


Kelly Loyd: Yes, we have really one operator that's really the maybe two that are kind of dominating it, but not after that, they're probably I think good about half the wells.


John White: And who is that?


Kelly Loyd: Canvas and Camino.


John White: Okay. Yeah, you've mentioned that before. Generally.


Kelly Loyd: I'm sorry, I misspoke. The last one was Continental, Canvas and Continental.


John White: Yeah, yeah, Continental. Generally, what formations are being completed?


Kelly Loyd: Woodford and Miss.


John White: The usual suspects?


Kelly Loyd: Correct.


John White: And they're all horizontal wells?


Kelly Loyd: Yes. And we have a couple of Springer wells too.


John White: Thanks for the detail. And then you're going to get 4 hor at Chaveroo, you're going to get 4 horizontal wells going?


Kelly Loyd: That's correct.


John White: And they're going to start in fiscal 2Q, 2025, and that is the same as calendar 4Q, 2024, correct?


Kelly Loyd: That's correct.


John White: Okay. And then it looks like a lot of things at Delhi have gotten cleaned up. So, congratulations on that.


Kelly Loyd: Yes. Thank you.


Operator: Our next question today comes from Jeff Robertson with Water Tower Research.


Jeff Robertson: Mark, you all had overall LOE was down about 10% in your fourth quarter from your third. There were some pretty big quarter-to-quarter fluctuations. Can you talk about LOE in Chaveroo, which was up quite a bit from the fourth quarter and also LOE in the Williston basin, which was down quite a bit? And I'm wondering whether or not the change in Delhi just reflects the lack of purchase of CO2 and whether or not that will, at least for that field, that will return to a more normal level, beginning in your second fiscal quarter. I'm just trying to think about how your LOE should look for the year compared to what you were doing a year ago.


Mark Bunch: Yes, I can answer that. So let's answer Delhi question first. You're actually correct. The main change in OpEx there was the fact you weren't buying CO2 because the purchase line was down. At Chaveroo, what looked like an issue on that is really more of just getting things initially lined out for production. You know how it is when you first bring on a bunch of wells like that, like we did. It's there's costs kind of bounce around a lot. We also early on had an issue where we had to shut -- we lost some production for about three or four weeks and then we got it back on. And so we have lower production, making the dollars per BOE probably look a little bit high. And then at Williston, the work over rates are dramatically down. And I'd like to credit the operator on that because they done a really good job of picking up from when we bought it. There's a lot of things that needed to be done to be fixed. And I think now going forward we're going to see typically on average, a lot less well work needed to be done. And they also, we expect with the electrification projects that they're doing in the Williston, we expect that to be a reduction in LOE as well.


Jeff Robertson: Thank you. Mark or Ryan, can you talk about where you think LOE will average in fiscal '25?


Mark Bunch: Yes, so I think to your point, I think we're going to see Delhi kind of return to more historical levels. And so just kind of looking at our last, kind of last quarter, we averaged around $20 per barrel, same thing with year ago period. So I would assume something that would probably be more in that. More in that area of $20 a barrel plus or minus going forward would be kind of, I would think steady state.


Jeff Robertson: And then on capital, Ryan, with the well, with drilling activity set to resume in second fiscal quarter of ‘25 and then again in the fourth fiscal quarter of ‘25, I assume that will cause just a little bit of lumpiness and capital spending. But can you share an estimate of where you think spending for the full fiscal year will line out?


Ryan Stash: Sure. So right now we have kind of a range of $12.5 million to $14.5 million for fiscal year 25. And that does include, obviously the Chaveroo drilling is something that we have more control over. Right. So that includes kind of the four wells we've talked about drilling completing and starting really the next development block. Now that depending on timing that could slip in the following fiscal year. The other big piece of that, obviously is SCOOP/STACK. We've had conversations with the operators and a lot of them have been fairly forthcoming with their drilling plan. So we are basing kind of our budget based on what they've told us. But as you know, that's dynamic. And if pricing continues to be soft, I might expect that to trend towards the lower end. Right. Just don't have as much visibility on the SCOOP/STACK.


Jeff Robertson: If I can slip one more in with respect to acquisitions and where the balance sheet is today. Can you talk about how you think about funding an acquisition?


Ryan Stash: Yeah. So right now, from a debt perspective, we're around on a pro forma basis, kind of around a turn of leverage. Right. Which is sort of what we've tried to manage the business to. And that hasn't changed. Our total borrowing base is $50 million, and it's really more self-selected. Right. It's sort of based on, you know, kind of mid first and how much they've been willing to sort of how much they can give to any single company. Right. But we have had conversations with them and have thought about and are looking into potentially expanding that credit facility, which will give us additional liquidity. Right. So I think we could certainly go up on a debt basis to expand sort of the credit facility there. And then really the other option, obviously, would be equity in the marketplace, and we would look to do that if we were to find a deal that was really accretive. Right. If we have a deal that makes sense for the shareholders and we feel is very accretive, that's always something that we could look to do as well. So I think it'd probably be a combination depending on the size of the deal of expansion of the borrowing base and potentially looking to look to raise equity if it really looks accretive.


Operator: And our next question today comes from Bruce Brown of Brown Capital.


Bruce Brown: Fellas, just wanted to check-in with you on, since we're almost all the way through the first fiscal quarter, is the ABL has it been reduced from what it was at the end of June?


Kelly Loyd: No. So, like I said, so the way our borrowing base works is, it's $50 million which is a borrowing base, which we haven't done our fall redetermination yet, but we have no reason to believe that it would be any different. The other number that's in there is what we call sort of margin collateral value and what that is really determines how much we have to hedge. And that's been around the last redetermination was right around $100 million just a little under. And we'll look at that number obviously coming up here in October. But again that doesn't affect our liquidity that's just more along the lines of sort of hedging covenants going forward.


Bruce Brown: Well, I was curious as to what extent has your ABL been reduced since your June 30 number?


Kelly Loyd: It hasn't as of this point at all. And we don't expect the borrowing base to go down below $50 million.


Bruce Brown: Right. But the outstanding part has not been reduced is what you're saying.


Kelly Loyd: Sorry, I was misunderstanding. So, yes, so we put out you'll see in our -- we'll file our 10-K here that's weak here. And you can see in our press release, we put out we did pay down $3 million. So we went from $42.5 to $39.5 at the end of the year -- at the end of our fiscal year.


Bruce Brown: Right. I was asking what is it currently.


Kelly Loyd: It's currently still the same.


Bruce Brown: It's still the same. Okay, fine. Got it. Thanks. Appreciate it.


Operator: And our next question is a follow-up from John White of ROTH Capital.


John White: I don't have a question, but Kelly, I just wanted to say I appreciated your comment on the anniversary of the 9/11 terrorist attack. That was well done.


Kelly Loyd: Thanks, John. It's yes, like I said, the heroism of the responders, the men and women, I don't know, it's moving to me and I felt it was important to say something.


John White: It was well done. Thank you.


Operator: And this concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.


Kelly Loyd: We just want to thank you all for taking your time and being with us on the call. And as always, we appreciate you. If you have any more questions, don't hesitate to contact us. Thank you.


Operator: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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