Q4 2023 Evolution Petroleum Corp Earnings Call
Participants
Brandi Hudson
J. Mark Bunch; COO; Evolution Petroleum Corporation
Kelly W. Loyd; CEO, President & Director; Evolution Petroleum Corporation
Ryan Stash; Senior VP, CFO, Secretary, Compliance Officer & Treasurer; Evolution Petroleum Corporation
Bruce Brown; President; Brown Capital Management
David Locke
Donovan Due Schafer; MD and Senior Research Analyst; Northland Capital Markets, Research Division
Jeffrey Woolf Robertson; MD; Water Tower Research LLC
John H. Bair; President; Ascend Wealth Advisors, LLC
John Marshall White; MD & Senior Research Analyst; ROTH MKM Partners, LLC, Research Division
Unidentified Participant
Presentation
Operator
Good afternoon, and welcome to the Evolution Petroleum Fiscal Fourth Quarter 2023 Earnings Release Conference Call. (Operator Instructions)
I will now turn the call over to your host, Brandi Hudson, Investor Relations Manager. Please go ahead.
Brandi Hudson
Thank you. Welcome to Evolution Petroleum's fiscal full year 2023 earnings call. I'm joined by Kelly Loyd, President and Chief Executive Officer; Ryan Stash, Senior Vice President, Chief Financial Officer and Treasurer; and Mark Bunch, Chief Operating Officer. We released our fiscal 2023 full year and fourth quarter financial results after the market closed yesterday. Please refer to our earnings press release for additional information concerning 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 13, 2023, 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 and adjusted net income. Reconciliations of these measures to the closest comparable GAAP measures can be found in our earnings release. Kelly will begin today's call with a few opening comments, followed by our operational results from COO, Mark Bunch; and then Ryan Stash, CFO, will review our fiscal year financials before turning back over to Kelly for closing comments.
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 W. Loyd
Thanks, Brandi. Good afternoon, everyone, and thanks for joining us for today's call. We appreciate everyone's interest in our reporting of our successful fiscal 2023 operational and financial results. However, before we begin to discuss our recent results, I would first like to make some general comments related to the announcement we put out this morning with PEDEVCO concerning our definitive participation agreement to jointly develop the Chaveroo oil field in the Northwest Shelf of Southern New Mexico. It's a conventional oil-bearing San Andres field in the Permian Basin located in Chavez County.
We're proud to partner with PEDEVCO, a company that shares our values and goals of providing superior total returns to shareholders. I will let Mark go into the details of the strategic partnership later, but I want to point out the biggest highlight of this arrangement first. The deal adds a new and exciting arrow in our quiver of capital allocation opportunities.
In the past, in order to grow our production and reserves, we have relied heavily on the A&D market. While we've been quite successful and plan to continue that strategy, the 80-plus high-quality locations covered by this agreement will allow Evolution to grow or maintain its production and reserves even in times where asset-level transactions are priced at what we consider to be unattractive levels. In turn, we believe this will be highly supportive to our dividend program for years to come. The wells here are 90-plus percent oil and located in the Permian Basin, which is an important market to which we want to be exposed.
Now on to our fiscal 2023 results. Our results for the period were solid and continued to demonstrate our assets' ability to generate strong free cash flow. We used our cash flow to once again fund operations, capital spending and shareholder dividends. In addition, I'm pleased to report that we repaid $21.5 million of debt, again, all from cash flow and exited the year with a debt-free balance sheet and increased liquidity.
We continue generating meaningful free cash flow from the acquisitions completed over the previous years, and we'll use these to continue to fund our strategic objectives. Of course, our ongoing success is a direct reflection of the hard work and accomplishments of our team. I want to thank each and every member of the Evolution team for their contributions and continued dedication to driving near and long-term value for our shareholders.
During the fiscal year, we paid cash dividends totaling $0.48 per common share. This was 37% higher than for fiscal 2022, which we view as a clear indicator of the growth and strength of our business. Our board recently declared a cash dividend of $0.12 per share for fiscal Q1 2024, payable on September 29, marking the payment of our 40th consecutive quarterly dividend. Since the company began paying dividends in December of 2013, we've returned approximately $102.4 million or $3.09 per share of capital to investors.
As we have discussed in the past, there are very few small-cap E&P companies that can say they have consistently paid a dividend for that length of time throughout several tumultuous commodity price cycles. We believe this reinforces the strategic view our board takes as we prudently grow the business through the targeted acquisition of solid, long-life and low-decline assets that will continue to support a sustainable quarterly dividend for the immediate and long term. In short, maintaining and ultimately growing the payment of a quarterly cash dividend remains front and center for our board and management team.
I will now turn the call over to Mark to discuss operations.
J. Mark Bunch
Thanks, Kelly. Total production for the fourth quarter fiscal 2023 was 6,484 net barrels of oil equivalent per day, consisting of 1,736 barrels per day of crude oil, 22,462 thousand cubic feet per day of natural gas and 1,000 barrels per day of natural gas liquids. Looking at our fourth quarter results in more detail, oil decreased 6% from 1,856 barrels of oil per day in the prior quarter, primarily due to downtime at the Delhi Field, where production was shut in for approximately 1 week to upgrade the facilities and install a heat exchanger to increase plant deficiencies.
Natural gas production decreased 8% from 24,489 thousand cubic feet per day or 4,077 barrels of oil equivalent per day in the prior quarter, primarily due to downtime in the Barnett Shale properties associated with extreme similar weather conditions along with gathering line maintenance and compressor issues. NGL production decreased 13% from 1,156 barrels of NGLs per day in the prior quarter, primarily attributed to downtime at Delhi Field properties to install the heat exchanger, perform NGL plant maintenance. At our Barnett Shale properties, our NGL volumes were affected by the same factors that impacted our natural gas production.
Looking at our full year results in more detail. Total production for the full year fiscal 2023 was 7,104 net barrels of oil equivalent per day, consisting of 1,806 barrels per day of crude oil, 24,956 thousand cubic feet per day of natural gas and 1,140 barrels per day of NGLs. Oil increased 6% from 1,696 barrels of oil per day in the prior year, primarily due to our acquisitions of non-operated working interest in the Jonah Field and the Williston Basin in the second half of fiscal 2020. This increase was offset by the downtime in fiscal 2023 at the Delhi Field, as mentioned previously.
Natural gas production increased 28% from 19,564 thousand cubic feet per day in the prior year, primarily due to acquisitions of non-operated working interest in the Jonah Field and the Williston Basin in the second half of fiscal 2022. The increase is partially offset by downtime in our Barnett Shale properties, as I mentioned previously.
NGL production increased 14% from 997 barrels of NGLs per day in the prior year, primarily attributable to the 2 acquisitions in fiscal 2022, offset by decreases attributed to downtime at our Delhi Field and the same factors that impacted our natural gas production in our Barnett Shale properties, as mentioned previously.
Based on discussion with our operators, we expect capital workover projects to continue in all the fields. Overall, for fiscal year 2024, we expect budgeted capital to be in the range of $4 million to $5 million, which excludes any potential acquisitions. Our expected capital expenditures for the next 12 months include 2 new drill wells at Delhi Field, drilled by our operator, Denbury.
As Kelly already said, we're really excited about our strategic partnership with PEDEVCO in the Permian. The agreement covers approximately 25,000 gross acres in and around the Chaveroo Field in Northeast New Mexico. The Chaveroo Field was originally developed targeting the San Andres formation with vertical wells on 40-acre spacing. We view the horizontal development of the San Andres and the Chaveroo Field to be very compelling based on extensive vertical well control, the data and results from previous PEDEVCO horizontal wells and analog developments of other 40-acre non-water flooded vertical San Andres fields.
We expect this project will significantly contribute to the successive evolution for years to come. We expect our CapEx to increase over the $4 million to $5 million budgeted for our existing assets due to drilling and completing expected 3 wells in this fiscal year. The ultimate amount of capital spent during fiscal year 2024 for drilling in the Permian will depend on the schedule agreed to with our partner.
With that, I will turn the call back over to Ryan to discuss our financial highlights.
Ryan Stash
Thanks, Mark. As mentioned earlier, please refer to yesterday's earnings release for additional information concerning our results. My comments today will primarily focus on financial highlights and comparative results between fiscal 2023 and 2022.
During the fourth quarter, we experienced extended downtime and maintenance across multiple assets and we're negatively impacted by much lower realized natural gas and NGL prices. However, our fiscal year 2023 results still represented record revenue, production and net income. During the past fiscal year, we had solid generation of cash flow, including adjusted EBITDA, which was $60.1 million for the current year compared to $52.8 million in the prior year, a 14% increase.
During this fiscal year, we funded our operations, development capital expenditures, dividends and share repurchases, all out of operating cash flow while also paying down debt drawn for our acquisitions. Supported by our continued strong operational and cash flow outlook, we paid a dividend of $0.12 per share in the fourth quarter and declared a dividend of $0.12 per share for fiscal Q1 of 2024, payable on September 29. Our cash dividend program has been and will continue to be a top priority as we clearly recognize the strategic importance of returning value to our shareholders.
We ended the fiscal year debt-free and our borrowing base remained at $50 million. On June 30, 2023, cash and cash equivalents totaled $11 million and working capital was $8.9 million. As a result, total liquidity on June 30, 2023, was $61 million, including cash and cash equivalents. This represents an increase in liquidity of 65% since June 30, 2022. This is a direct result of our targeted and immediately accretive acquisitions over the past couple of years. We are ideally positioned for the continued execution of targeted future growth opportunities that meet our strategic vision.
Lease operating costs increased to $59.5 million from $48.7 million in fiscal 2022, primarily driving the overall increase was the acquisitions of the Jonah Field and Williston Basin, which occurred in the latter half of fiscal year 2022. Cash G&A expenses increased 18% to $7.9 million from $6.7 million in fiscal year 2022. The increase in expenses is due to approximately $600,000 in salary employee benefits from the addition of personnel added since the prior year and $300,000 in professional fees associated with our search for a CEO.
Also contributing to the increase are additional fees for accounting and audit-related services and public reporting expenses due to the increased size of our company. Net income for the fiscal year was $35.2 million or $1.04 per diluted share compared to $32.6 million or $0.96 per diluted share in fiscal year 2022.
I'll now turn the call back over to Kelly for his closing remarks.
Kelly W. Loyd
Thanks, Ryan. We continue to benefit from the targeted acquisitions we have completed over the past few years. And as a result, we enjoy a larger and more geographically diverse asset base and commodity mix. This provides us with a solid platform for significant cash flow generation that we will continue to use to support and enhance our well-established shareholder capital return program. Our shareholders expect a consistent and meaningful cash return on their investment, and we remain committed to maintaining and, as appropriate, increasing our dividend payout over time.
As in the past, we will maintain a conservative balance sheet and remain disciplined in our management of capital as we fully recognize the cyclicality of our business. Our ongoing commitment to remaining fiscally prudent was evidenced by our prompt pay down of our debt position following the closing of our most recent acquisitions. As a result, we are well positioned to execute on targeted high rate of return and immediately accretive growth opportunities as appropriate. We will continue to execute our strategic plan focused on maximizing total shareholder returns and optimizing every dollar that we invest.
With today's announcement, we have added an opportunity to have a meaningful organic growth component. As with all of our capital allocation decisions, any drilling here must compete with dollars to be used elsewhere, and the nature of this arrangement will allow for that.
We are not required to pay upfront for anything other than the acreage cost for the immediate development block, which we will be developing next. This is unlike other situations where companies must pay in advance for entry into a field and prepay for well locations. This is a true strategic partnership where development will occur sequentially with the decision moved forward based on success. We and PEDEVCO expect that this partnership will produce positive results for many years to come.
With that, I'll turn the call over to the operator for questions. Thank you.
Question and Answer Session
Operator
(Operator Instructions) And our first question comes from John White of Roth Capital.
John Marshall White
Congratulations on the PEDEVCO deal. I agree with you. I think it was very attractive.
Kelly W. Loyd
Thank you, John. John, can -- before we get to your question, can I just make one additional comment?
John Marshall White
Yes, of course.
Kelly W. Loyd
Okay. So I just want to reiterate, as I've said before, that we -- when we and the Board, we set dividends, we do so with a multiyear horizon expectation based on our production and resulting cash flow that is generated from our forecasted pricing and production levels. With this in mind, we fully expect that our cash flow, combined with our pristine balance sheet and our cash and cash equivalents will be able to more than fully cover our dividend, which, by the way, we just reset at $0.12 per share.
Not only do we believe it will fully cover our dividend, it should cover all of our capital needs up to and including any planned drilling activity. We're confident, as you mentioned, John, that this strategic partnership will be highly supportive of our dividend for quite some time.
John Marshall White
Okay. I appreciate that add-on. So regarding the PEDEVCO deal, with respect to capital expenditures, Mr. [Bunch] offered some commentary. However, his commentary was, I would say, highly conditioned or highly qualified. Can you offer any more detail about the potential CapEx at the PEDEVCO deal, maybe put it in terms of a minimum or a maximum or a 6-month timeframe or a 12-month timeframe? Whatever you're comfortable.
Kelly W. Loyd
I can -- absolutely. Look, these are fluid and there are plans that we're going to come up with and finalized with our partner, PEDEVCO. Initially, I'll tell you what we're both thinking on this. We have an initial 3-well pad, which we're working on. It's been permitted. The expectation is that we want to get to that 3-well pad sooner rather than later. Again, we need to finalize all the details.
In general, the way we thought about this is basically, again, fluid can change depending on conditions environments, all this, but essentially about 8 wells gross per year is in general, how we've started thinking about the budget on this together. So again, 3 wells at roughly $3 million per copy or half of that is 4.5%, and we have acreage payments. So $4.5 million to $5 million would be our expectation for the initial 3-well pad.
And then as I mentioned, the initial goal, again, which is highly dynamic and fluid, and we'll adjust as we go. But at least our initial sort of game plan is roughly around 8 wells per year together, which we'd be 50% of.
John Marshall White
That's a lot of extra detail, and I really appreciate that, Kelly. So on the maintenance or some of the infrastructure work, let's just make sure we understand. Is the work at Delhi, is that all completed? Is the heat exchanger installed and working?
J. Mark Bunch
John, this is Mark Bunch. And the heat exchanger is up and running. The plant turnaround was completed. And so we expect that Delhi is back running at rated load. So we're -- we see that Delhi is performing as we would be expected to.
John Marshall White
Okay. And same question on the Barnett Shale with the gathering line maintenance and compressor issues.
J. Mark Bunch
The Barnett Shale that was all obviously related to compressor and gathering stuff. We see that that is -- we believe that that is kind of generally on the mend. But as of right now, we don't know whether that is -- whether it is completely back up and running as it's supposed to be.
Kelly W. Loyd
As you know, John, when it's 112 degrees in Fort Worth, compressors don't always act properly, and they're going to run into issues, which clearly they did for much of the summer. But I think we're starting to see that get better.
Operator
The next question comes from Donovan Schafer of Northland Capital Markets.
Donovan Due Schafer
And I'm sure you know this, but it's Donovan Schafer. So I want to start picking up where John left off. The -- so we covered the Delhi and the Barnett. But in the Williston, and this could actually, honestly, be a data entry error on my part, haven't been able to double check this, but it looks like the Williston was down quite a bit too. Am I just wrong on that? I have that Williston's down something like north of 10% quarter-over-quarter. So was there a decline there? Or is that just an error in my model? And then what was the cause?
J. Mark Bunch
Donovan, this is Mark Bunch. And there was -- during 1 month, we had a downtime on the compression side there, and so it affected NGLs, it also affected gas production. And that's the main cause there.
Donovan Due Schafer
Well, I'm talking about -- you're saying this is true for the -- that this is the Bakken, the Williston?
J. Mark Bunch
Yes, yes. Yes. For the Williston.
Donovan Due Schafer
Really? Okay. Also there -- the compression issues in both?
J. Mark Bunch
Yes.
Donovan Due Schafer
And also a compressor down in the Barnett? Okay. Got it. Okay. Okay. And then I want to turn to -- so for the year-over-year production and maybe Ryan has this information. But for the full year, the year-over-year production numbers were good but of course, part of that comes from the Jonah and the Williston acquisition, having a partial contribution last year and having a full year contribution this year.
So is there anything you can give us in terms of to be able to kind of compare apples-to-apples either last year versus this year kind of including those pro forma for the full year last year or we're stripping them out just like what the apples-to-apples change in production, presumably some amount of decline? Do you have that information?
Ryan Stash
Yes. Don, we haven't done a full pro forma. We tend to look at it sequentially, right, quarter-to-quarter. And so we can try to come back with you on that for trying to pro forma out those acquisitions or as if we own them the full year. But I mean, ultimately, I think the -- at the end of the day, right, we have seen declines in the assets for natural reasons, but this last fourth quarter, unfortunately, we got hit with maintenance in 3 of our fields, which are major asset fields extended downtime combined with pretty much the lowest prices we've seen realized in 2 years. So unfortunately, it wasn't great timing for all of us, but we can certainly get back to you on what we think the -- if you're trying to get to what the actual field decline is, field by field kind of --
Donovan Due Schafer
Yes or just getting into kind of your blended decline factoring out those step function increases from transactions. So I guess, if you could -- if that is something you feel like you know the answer to, are we still sitting at a, I don't know, 5% annual decline rate for in a business-as-usual situation without incremental acquisitions or where do you think (inaudible) decline rate endpoint?
Ryan Stash
I think we've guided before to like high single digit to 10% sort of annual decline.
Donovan Due Schafer
Yes, yes.
Ryan Stash
Yes. We don't -- I don't think that that's necessarily changed, but the fourth quarter obviously is going to throw some things off when you're looking at a decline rate.
Donovan Due Schafer
And then I also want to --
Kelly W. Loyd
Hey, Donovan?
Donovan Due Schafer
Yes, go ahead.
J. Mark Bunch
Yes, just a quick deal. And I want to make sure you understand like the Williston, that compression issue was resolved also during the quarter. It was just a 1-month downtime and it's back up.
Donovan Due Schafer
Okay. And so then from a kind of -- I mean, I know you don't give guidance, but maybe does it -- is it reasonable for us to think there will be kind of like a reversal of things where there's kind of a, I don't know, a pop might be too strong of a word, but a movement back up in terms of total production numbers going like from this quarter to the next quarter just because a lot of that has been fixed, and there's a little bit of an upward movement just to get back on to a normalized decline path. Is that a fair expectation?
Kelly W. Loyd
Yes. Donovan, in order to avoid guidance, we won't say a whole lot on that. But I think you understand that there were some unique events that happened, so.
Donovan Due Schafer
Okay. And then I think John did ask about the PEDEVCO cost associated with that. You may have been asked us too maybe I missed it, but just kind of the time line of when that would start to contribute some amount of incremental production.
Kelly W. Loyd
So again, that's something we are working with them on. I think both parties are incentivized and excited to get those initial 3-well pad anyway going as soon as practical, and we're both comfortable doing that. So I'm not going to give you any specific timing, but I -- look, I'm hopeful it will be sooner rather than later and expect that, so.
Donovan Due Schafer
And this is similar conceptually to what you guys did in the Williston, right? I mean, there might be some differences to the terms of the same idea of having a way an avenue through which you can drive growth when it's not an attractive market for M&A. Is that -- are they -- is it appropriate to kind of put the two in the same bucket?
Kelly W. Loyd
It is. And in our mind, those are -- they will compete for capital just like everything else we do with our next marginal dollar. We -- at this time, look, we think the economics are very attractive in the Chaveroo Field with PEDEVCO. So that -- absolutely, yes. And these are just -- it's going to a point where they've moved to the front of the line. We think they're very good economics.
Donovan Due Schafer
And can you talk about how you source the deal? Just, I know that sometimes there can be some interesting nuggets there. Did this come in through a typical channel or it's the relationships you already have, they came to you and knew you'd be interested in some conventional stuff. And I know this isn't technically EOR, but you kind of understand you're familiar with this type of taking a second pass of things. So, yeah, how does this kind of come about?
Kelly W. Loyd
Well, it mostly came about -- I got a call from Doug Schick at PEDEVCO, whom I've known for several years. We actually used to coach Pee Wee football against each other. And I've known Doug and we've spoken over the years about various business deals. And I believe Doug had an adviser looking in to do something. I think it was the Roth guys who have been very good for them. And so it made a natural sense. It's nice to do business with someone you can trust.
Operator
The next question comes from Jeff Robertson of Water Tower Research.
Jeffrey Woolf Robertson
Mark, one question on the downtime. Are you aware of any service interruptions that you expect over the next couple of quarters from your midstream providers in the Barnett Shale?
J. Mark Bunch
No, not really.
Ryan Stash
We wish they'd let us know when they're going to do that, but they unfortunately, don't. I mean, I think we talked about this before, right? So EnLink took over for Crestwood, right? When Crestwood sold the system. And they've had extended growing pains of trying to optimize the way they run the area. Our operator and partner, Diversified has certainly talked to them a lot. And so we certainly hope and are expecting them to do a better job going forward. But unfortunately, they're not going to give us any insight as to when they're going to have downtime or issues, unfortunately.
Jeffrey Woolf Robertson
I've partially read through the operating agreement that I think was filed in an 8-K by PEDEVCO this morning. Kelly, with respect to the initial 3 wells, I think you said the goal would be to spud the first one by the end of this year. Would your expectation be to drill all 3 of those back to back and then complete them back to back? Or would it be 1 well drilled 1 well completed? Can you talk about how you think about that initial pad development?
Kelly W. Loyd
I'll let Mark talk a little bit more to that. But look, just from an economic standpoint, drilling them on a pad as a package is a better deal. So that's certainly our expectation, but.
J. Mark Bunch
Yes. No, they'll be drilled back to back and then completed back-to-back. That's the expectation right now because that's the most -- makes the most economically viable way to do it, and then they'll be brought online at the same time.
Jeffrey Woolf Robertson
And in terms of infrastructure, Mark, I know there's -- you all would share, I believe, in any infrastructure costs related to the production facilities. Can you just talk about what's in the area that you can move oil into? I know it was developed initially with vertical wells?
J. Mark Bunch
Yes. The plan right now is really not to use any of the vertical well facilities because the wells -- the horizontal wells are so much more prolific than the vertical wells. So the costs that we're -- with the capital costs that we're looking at are actually involved putting in new infrastructure, putting in new tank batteries also. And we'll optimize that for being horizontal wells.
Jeffrey Woolf Robertson
Mark, from what I've read about horizontals san Andreas wells, it's not an unconventional formation in most areas. So the initial decline rate is not as steep as more as a shale formation. Is that true in this area as well?
J. Mark Bunch
Yes. I would say that typically, in a Wolfcamp -- say like the Delaware part of the Permian where you have the Wolfcamp, those decline rates are probably above 95%. Here, it's going to be less than that.
Jeffrey Woolf Robertson
And then just lastly on funding, Kelly, you mentioned in your remarks or maybe Ryan, in terms of funding the capital program, funding the drilling program with available liquidity, and it appears you still have -- will have the flexibility or could have the flexibility to continue to fund the dividend. And so that really shouldn't be at risk at this point. Is that --
Kelly W. Loyd
Yes. Look, dividend is first. So it's -- I don't want to put that in the opposite order. So yes, for sure.
Operator
Our next question comes from David Locke of Old Mammoth Investments.
David Locke
So I think you've kind of answered these questions, but I just want to answer them -- I just want to ask them again for clarity. So as it related to the downtime, particularly at Delhi, but also in the Barnett, would you expect that those compression issues being fixed would get production in those particular areas back to where they were in March as we go forward?
Kelly W. Loyd
So listen, it's -- we do expect as those compression issues get better, you will see better results. So I'll say that.
David Locke
And then for some clarity on the Permian assets, I'm just trying to triangulate a few things that you said. So 4 gross wells a year is the expectation. And you think you can fund -- sorry?
Kelly W. Loyd
8 gross wells. 4 net.
David Locke
I'm sorry. Did I say 4? My apologies. So 4 to you. So do you expect that you can fund that and the dividend out of free cash flow under sort of the -- if we look at the forward curve for oil and gas today?
John Marshall White
That's right. Yes. No, that's right, David. I mean, we -- when we look at where pricing is, like you said, in the forward curve, obviously, assuming oil has already increased from what we saw in the fourth quarter, so of NGLs and just citing aside, right, NGLs in the fourth quarter (inaudible) been a long time and so that certainly impacts us too. But when you take prices into consideration, free cash flow that our other assets generate plus cash that we're going to get from drilling the PEDEVCO, right? There is some delay there, but we do think this asset becomes self-funding pretty quickly. We don't see any issue covering the dividend plus funding our proportionate share of 8 wells per year.
Kelly W. Loyd
Honestly, that's -- just to reiterate, that's one of the things that we're excited about with this deal is the money we're spending goes into the ground and drills wells. We're paying for acreage to get in on a block-by-block basis, but that's a relatively small number. The rest of the money goes into the ground. It starts producing oil, again, probably within about Mark, 60 days?
J. Mark Bunch
Yes. Longer than that, but somewhere -- very reasonable timeframe. Maybe 3 months frame.
Kelly W. Loyd
For when the money gets spent to when you start getting revenue from the oil -- from the wells you drilled. It's not a huge multiyear payback. You got to pay up front and then you get paid back. We and PEDEVCO excited about the fact that the money going in to this goes into the ground and then starts making oil for both of us.
David Locke
Under the understanding that there is a delay between when you spend the money and when the oil starts coming, would you expect that the expenditure of this capital on a pro forma basis would, at a minimum, offset the declines in the other assets of the portfolio?
Kelly W. Loyd
So I'm not sure I'm prepared to go into that level of detail. But look, we're certainly not on the wrong track.
David Locke
Okay. And then if I could sort of cycle back to the Williston assets, which I guess you guys have owned for the better part of 18 months now or maybe that's the date of announcement, not the date of closing. But --
J. Mark Bunch
That's pretty good.
David Locke
We had talked several times on previous conference calls about maybe putting development capital into those assets. And -- well, again, we're sitting here 18 months later and that really hasn't happened. So why has development capital not gone there? What's holding it up? What makes these Permian assets look superior to you because if I didn't misunderstand, you said a few minutes ago that they have kind of jumped to the line?
Kelly W. Loyd
Okay. So yes, I mean, when -- again, this was primarily, like first and foremost, the Williston acquisition was evaluated and primarily in a large, large way purchase because it was a great PDP purchase. We really like the existing assets and how they're producing. It also had drilling locations, which at the time, when we evaluate them, there was a -- the drilling and completing cost was -- I don't remember what it is, but let's just say it was a certain number. Very shortly after that number moved up 20%, 30%, which again, it makes the returns pretty good. But the risk associated with drilling them and in the return you've got, it's still something that we think is attractive. It just -- it didn't jump out at us that we need to go do now.
If you see some -- there's been plenty of inflation across the service sector. So if we could see those prices abate some, then that project becomes certainly more attractive. But at this point in time, with the current drilling costs that are out there in the world today and a very modern AFE, which we reviewed, the returns here are just, like I said, superior to the wells there.
David Locke
So would you consider that those wells, the Williston development opportunity to still be in sort of like a theoretical backlog subject to some combination of oil price and service cost?
Kelly W. Loyd
Absolutely, yes.
David Locke
And then again, it's been the better part of 18 months now since you guys have done any acquisitions. You kind of implied -- so I guess I'll try to get you to state it outright. The PDP acquisitions feel a little bit too expensive to you still, and that's why you're looking at some more organic stuff?
Kelly W. Loyd
Well, okay. So let's be clear, it was never either or, right? It was -- we were always going to look to have the potential for us to be able to put some money into the ground. And when there are years like this past year, when the criteria that we require to make sure that acquisitions are really highly accretive to us, just aren't there. I mean, just so you know, we use the same proven screening and processing and evaluation sort of process we have for years. We screened evaluated and even offered on many candidates.
But like I said, the seller's expectations just weren't in line with what we require to make it a good acquisition for us. That strategy is -- has never gone away. We're still doing it as we speak, we're evaluating several deals. So that's something we very much still want to do, and we think this complements those very well and anyway. So I want to make sure I'm not leaving you with the impression this is all we're going to do. We -- our goal is to go find highly accretive PDP acquisitions as well.
David Locke
Okay. So -- go ahead, Ryan. I'm sorry.
Ryan Stash
Yes, I think it is fair to say that the acquisition market has been choppy maybe as a way to describe it. We look at -- we try to source deals through connections through negotiated and also through marketing processes. And there was probably a lull towards the beginning of this year of really quality deals that we saw come out. We have seen that pick up, to be honest. We have seen a lot more deals that might fit us pick up here in the near term. But there was a portion of -- we didn't just see as much deal flow as we would have liked to.
J. Mark Bunch
And I'd like to follow up with what Ryan -- just kind of on top of that. We look at this as a way to flatten out our ads. I mean, it's a low-risk area. We know there's oil there. And the problem with acquisitions, if you just 100% rely on those, it tends to be kind of lumpy because they come kind of in groups -- and this way, it kind of helps flatten out our production profile as we go just because we're developing organically, we're not having to go out and bid for it every year.
Ryan Stash
Yes. I mean, when you're -- especially for the oil assets, right, if you're in a backward-dated commodity curve in oil, you'd much rather drill now to accelerate your cash flow then have to pay the sort of buy on a curve that's declining. It makes it a little bit easier and we'd rather accelerate that right now when we see those prices.
J. Mark Bunch
Yes. And with current prices, we would really love to drill these wells as soon as possible because, obviously, the prices have picked up lately.
David Locke
So is stuff happening in the A&D market and you guys as -- I don't think I'd be insulting you by calling you value buyers just sort of aren't there. Is there still like a big differentiation between bid and ask and deals just aren't happening?
Kelly W. Loyd
Well, it's a little early to say. So like I said, we haven't stopped that process. So I don't want to say too much because I don't know who's listening on the phone.
J. Mark Bunch
No, I would just say, we --
Kelly W. Loyd
We're excited about opportunities that are out there. We think the market has become a little more realistic from the seller's perspective. How about that?
J. Mark Bunch
And we've actively gone after acquisitions. We had -- even while we were developing this Permian Basin opportunity, we were actively looking at other acquisitions and making offers on them. And I don't feel like we were like wildly out of the market. So I'd expect us to still be able to do those type of things too. We're just trying to like make it so we're not totally dependent upon acquisition work.
David Locke
Okay. And then we've talked on a couple prior conference calls about just like the general notion that growth CapEx would come from internal cash flow and acquisition probably gets funded through the credit facility to then be paid down over the course of the next couple of the -- couple following years. Does that -- is that still sort of like an accurate high-level description of the strategy?
Kelly W. Loyd
Yes. That's our base plan for sure. You are dead on.
Operator
The next question comes from Bruce Brown of Brown Capital.
Bruce Brown
Appreciate all the color you've given us. On the Podesco deal, how long have they been active in that field? And how many wells have they drilled? And what is their success rate been?
J. Mark Bunch
The timing of that, I'm not -- they started in, I think, 2019, maybe 2018.
Kelly W. Loyd
'18. But -- so what -- and look, it's a better question for PEDEVCO than for me. But the way we sort of characterize it they had sort of -- they had their generation 1, more science kind of wells where they were trying different landing zones, different frac sort of, I don't know, resins and different kind of sands in different ways and how the size of the customers are spacing between the clusters and trying different things, then they went on to what I would call their generation 2 sort of style of frac, which they tried and experimented with some of the things that worked and tried some more stuff to see if they could expand or is this going to work better or worse.
And through that science that they did, they've come up with a plan and a style and a way to produce these that certainly they and we also think can be improved upon. But as a base case, we don't do any better than what we would call sort of the Gen 2 sort of completion design and where to land and all those sort of learnings that have been gained. I think we still have a very attractive return. But both they and we expect there to be plenty of room for upside, which, again, this isn't something we just walked into. This has been 4 months of detailed technical analysis and looking at all the science we can.
And again, our staff in-house is -- has experience in this and is excellent at this. And we did a lot, as I think you even had an industry expert we consulted with. And so where we've become comfortable is what we know can be done, and we're also very -- very strong expectations that we'll beat that for -- anyway.
Bruce Brown
Well, so they're well up on the learning curve as you probably would put it. So they're at a point -- it sounds like they're at a point where perhaps they can maximize the knowledge they've accumulated and target -- their drilling targets would be more carefully planned and selected.
Kelly W. Loyd
I think that one of the biggest learnings is really what zone you want to land the wells in. Like anywhere else, you're going to try, hey, maybe if we put it here, we might get 2 of the different San Andreas in interest pay zones, if we put it here, we get the -- and so they did all the right stuff you should do when you're trying to learn as much as you can.
We walk away, again, we've learned a lot from that as obviously they have, and they have expectations and ideas and ways to move from that sort of Gen 2 as we call it, just sort of the Gen 3. There's been a whole lot of science and learnings. So, it's -- we're excited.
J. Mark Bunch
Just so you know, yes, they've drilled 10 horizontal wells out there.
Bruce Brown
Okay. Yes. So the -- yes, exactly. So that's good. All right. Well, good luck with that whole process, it sounds very promising. The other question I had is, since we're almost done with the first fiscal quarter of fiscal '24, Oil prices have risen substantially during this period of time from where they ended the last quarter. And natural gas prices have -- appear to have improved some, but can you quantify what percentage impact -- what kind of range percentage impact that might have on your cash flow in the first quarter? I mean, just in a very broad sense.
Ryan Stash
Yes. So I mean, obviously, the challenge of being non-op is we're still delayed on getting actual prices in the field, which can sometimes differ than what we estimate. But if you're just looking -- and I'll talk on more on the gas side, right? The gas side was really some of the lowest prices that we've seen, right, quarter-over-quarter sequentially, right? So on the gas side, Q4 was a trough, right? And so if you look at what we've seen pricing for Houston Ship Channel is one of the pricing hubs that we sell our gas to Barnett and then Opal up in the Rockies.
And so both of those indices are, on average, call it maybe $0.40 to $0.50 higher this quarter to date than they were last quarter. So I don't have the exact percentage, right, but you can -- but it's not a small percentage, right? That's a pretty material move if we're talking about $2 to $3 gas, the Barnett less than $2 gas last quarter, if you're adding -- if you're adding $0.40 onto that. So certainly, we expect to see some improvement this quarter on the gas realizations.
Also NGLs, right? I talked about that earlier, but NGLs were kind of falling off a cliff, if you look at from April down to June, June being kind of the low month, they traded down quite a bit. Ethane itself is up 50%, 60% since last quarter. The Barnett has quite a bit of ethane. Some of the heavier components are up as much as anywhere from 5%, 10% to 30%, 40%. So overall, NGL prices, I think those are the 2 pieces you mentioned oil, but I think NGLs and natural gas or 2 or it might be more noticeable in realizations.
Bruce Brown
Sure. That's -- yes, obviously, the bulk of your production is in those 2 areas. So, as a company -- yes, I understand. So that's great. Okay. I appreciate the color.
Operator
The next question comes from Joseph Crusty, a private investor.
Unidentified Participant
My question is about the future development potential of the Delhi Field, assuming the acquisition of Denbury by ExxonMobil closes. Do you anticipate any positive operational changes in the development cycle of the field or changes in asset structure as a result of this transaction due to the size and scale of Exxon flowing through to the per barrel cost structure? Or is it too soon to begin thinking about this? And that's it.
Kelly W. Loyd
I appreciate that. So yes, and that's a question we've had to think about. And I would just say one thing you need to know about Exxon is that they're not dumb. They're going to do the smart thing, they're going to do the right thing. So look, I would anticipate operations will be as good or better. I think Denbury has done a terrific job. I think Exxon has the scale and capability to do just as well and perhaps get prices even cheaper.
One of the things we've been asked about in the past is the carbon capture permitting and all that and honestly, I still don't have any way to tell you whether Delhi will get that permit. So there could be some kind of benefit for that. But look, Denbury was planning on working on that and pushing towards it. And I would just suggest if Denbury can do it, I don't see why Exxon couldn't do it just as well, so.
Ryan Stash
Yes. I mean, the only I would add -- The only thing I would add is just the one thing we've had in the past with Denbury is capital constraints at Delhi. And so while we don't know what Exxon's plans are specifically for the field, the one thing Exxon is not is capital constrained, right? And so whereas Denbury went through bankruptcy, they went through a period of not spending much money at all, that shouldn't be an issue here from a capital perspective.
Unidentified Participant
I'm a very happy shareholder gentleman. Thanks for being such prudent stewards of capital.
Operator
The next question is a follow-up from Jeff Robertson of Water Tower Research.
Jeffrey Woolf Robertson
Thank you, Mark. As you -- or Kelly or Ryan. As you model the Permian wells, can you talk about what kind of impact you think those -- that asset could have on Evolution's realized oil price and also LOE?
Kelly W. Loyd
I mean, Permian pricing this reviewers WCS sour, right?
J. Mark Bunch
It's about $3 deduct to --
Kelly W. Loyd
WTIs.
J. Mark Bunch
Yes, it's about a $3 deduct to WTI, maybe a little bit more than that, $3 to $4. And I don't expect these will be particularly expensive to operate. So yes, you would expect -- I would expect that overall, the margin for the company would be better just because a lot of the other stuff we have is either water flooded or CO2 flooded, which typically is low margin -- is a lower margin type of operation. So yes, I would think the margins would improve.
Kelly W. Loyd
I definitely think -- I mean, the work we've done, it certainly stacks up to be a fairly high margin, low-cost operating-wise oil play.
J. Mark Bunch
Well, and it's like whenever you have new wells, you're drilling new wells, are going to be higher rate wells, and that typically translates into higher margins.
Operator
The next question comes from John Bair of Ascend Will Advisors.
John H. Bair
Just to be clear, a real simple question. I guess as you move forward to develop the drill, the 3-well pad and your other operations, all that should be paid for through cash flow. Is that correct? In other words, you've ended the quarter and the year debt-free with cash on the books and so forth. So I'm just kind of curious if I'm reading this right or hearing this correctly.
Ryan Stash
Yes, John, that's the plan. Obviously, pricing aside, but where prices are right now in the forward market and where we expect, yes, we would plan -- and it's always our goal to drill those out of cash flow, right? We wouldn't (inaudible) additional funding to drill those.
John H. Bair
Right. So your other operations, other fields and so forth. So I'm just -- I'm a little -- I guess I'm a little stunned at the reaction today and obviously, a lot of questions about and I think inferring that the dividend payment might be in jeopardy and yet you've confirmed the $0.12 and have long made that a very priority. And so I'm just -- I'm a little baffled at the extent of the reaction that's gone on here today. And I don't know if you would care to comment on that at all or?
Kelly W. Loyd
Okay. So here's our goal. We're going to make sure we do everything we can to make everyone who sold regret it and buy it back. How about that?
John H. Bair
Right. Understood. Did you do any stock buyback in the last quarter at all?
John Marshall White
We obviously come out with our 10-K later to confirm that. But the stock buybacks were honestly really limited for the prior -- we did a lot more or let's just say that in the March quarter that we already published. We'll publish on our 10-K after the call today.
John H. Bair
Well, I would echo the previous -- one of the previous commentators that been pleased with how you've moved forward. And I hope that you do prove everybody that have been dumping this thing today in error. So keep on doing what you're doing.
Kelly W. Loyd
Thanks for the sentiment. And look, as you know, and I think it's pretty obvious. We run this company for the long run, and we think about things with multiyear horizons. So while nobody likes to see what's going on in the stock market today with our stock, we're not going to let that make us make any rash decisions. We're always going to do what's in the best interest for our shareholders in the long run, so.
Operator
The next question is a follow-up from David Logoff of Old Mammoth Investments.
David Locke
Is there a way to do sort of like a quick recap for civilians of what went haywire in California last year, at least as it regarded the prices that you got in Jonah and what you're sort of thinking the situation looks like over the course of the next 9 months?
Ryan Stash
I wish I had that crystal ball going forward. But -- and going past, if you recall, so last winter was unusually -- I wouldn't say unusually but probably more -- colder than the normal, right? If you look at sort of the weather maps on the West Coast and California, a lot due to La Nina. So the issue you have in California is very, very little natural gas storage, and so they have to buy everything on the spot market. And when cold weather strikes, people will pay what they need to get the gas to heat their homes, right? And they can't pull it out of storage. And so you tend to get these really high prices and spikes out there, not unlike we've seen right in the power market in Texas when you've had heatwaves, you get that in California during the wintertime.
Now interestingly, we saw that in the summer a little bit too, where we saw prices in July and August spike a little bit with the heat out there, too. So any time there's a power demand, whether it's to cool your home or heat your home, you're going to see probably spikes. If you look out in the forward curve, it depends on the day, but this winter, we last time I looked, you could hedge prices for probably around $3 premium to Henry Hub. It may have gone down a little bit here in the last couple of days, but call it $2.50, $3, maybe even as much as $4 premium hedging in the forward market right now for winter out in California. So I think the market is still sort of expecting to potentially be short barrels out there.
If we saw an unusually warm winter in California, then we might not quite see the demand that we've seen in the past winters. But historically, we have seen at least some pump over the winter months. And I'll also say, I think I've talked about this before, we sell gas since we take our gas in kind in Jonah and we market it ourselves, we sell it on kind of seasonal contracts, so winter and summer contracts. And winter contracts, we get a pretty healthy premium even to what you can sell at Northwest Pipeline or Opal. So we would also expect that premium coming up this winter.
David Locke
Okay. So you're sort of -- you're kind of hedging but not -- but not like in the futures market per se, just given the nature of the way you're contracting works?
Ryan Stash
That's right. So yes, so we basically sell as much gas as we're comfortable selling firm, if you will, in the wintertime at a fixed price Northwest pipeline. It's first a month Northwest pipeline plus spread, right, which I would tell you in the winter time is a fairly healthy spread. And so we do have a physical contract. Like you said, it's not really hedged. We're subject to the movements of Northwest Pipeline, but we get a premium to whatever that price is during the winter.
Kelly W. Loyd
But to be clear, we locked in the premium we're going to get, not the base price.
David Locke
And then sort of cycling back to capital allocation a little bit and acknowledging what's going on with the stock price this afternoon, because low 6s looks an awful lot different than high 9s. How do you guys think about stock buybacks? Where would the capital come from for a stock buyback to the extent that you now have functionally committed a fair amount of cash flow to the Permian assets?
Kelly W. Loyd
Well, it's -- it would -- again, it would compete for dollars. So again, everything is on the table at all times. And again, we are very excited to be in this in this drilling partnership, and we want to go forward with it. But our priorities are going to be the best use of every dollar. So that -- everything is fair there, so.
Ryan Stash
Yes, I think the way we might think about it, and obviously, we -- the Board has authorized sort of the overall share buyback plan, but we do authorize -- generally, we enter into 10b5-1s, right, on kind of a quarterly basis. But I think as we think about capital allocation, I think if you saw -- obviously, the dividend we've now said is very important, which we've always said, and we've said it at $0.12. And so the dividend, obviously, is a base dividend we're certainly going to pay.
Above that and above any capital from the PEDEVCO Permian asset or any other asset, if we saw more outperformance in commodity prices with excess cash flow, especially if our stock stayed, as you mentioned low 6s versus high 9s, there might be a reason for us to take another hard look at possibly buying some shares back with sort of outperformance or excess cash flow. If that makes sense.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Kelly Loyd for any closing remarks.
Kelly W. Loyd
Just quickly, I want to thank everyone for taking the time. As you know, we are always here to answer questions. So anyway, I appreciate your interest and your time. Thank you.
Operator
The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.
