Thank you for standing by. This is the conference operator. Welcome to the Evolution Petroleum Second Quarter Fiscal 2018 Earnings Release Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there’ll be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to management. Please go ahead.

Welcome to Evolution Petroleum’s earnings presentation for our fiscal second quarter ended December 31, 2017. We will discuss operating and financial results for the quarter. I am Randy Keys, CEO of Evolution Petroleum. Please note that any statements and information provided today are time-sensitive and may not be accurate at a later date. This presentation contains forward-looking statements of management’s beliefs and assumptions based on currently available information. These forward-looking statements are subject to risks and uncertainties that are described in our filings with the SEC. Actual results may differ materially from those expected. Evolution reported excellent financial results for the quarter ended December 31, 2017. Our revenues of $11.1 million were a quarterly high for Evolution since its founding in 2003. Most of this increase resulted from higher oil prices, which averaged $57.30 per barrel in the quarter. These are price levels we have not seen since mid-2015. Since the end of the quarter, we’ve seen a further improvement in oil prices. Our net income for the quarter was $9.9 million or $0.30 per share. This includes a one-time tax benefit of $6 million from the adjustment of our deferred tax liability to reflect the lower corporate income tax rate in the 2017 Tax Cuts and Jobs Act. The big news for the quarter is the increase in our quarterly common stock dividend from $0.075 to $0.10 per common share. This is $0.40 per share on an annual basis. This increase restores the dividend to the original level, set before the industry downturn in late 2014. Our balance sheet remains very solid with $27.6 million of working capital, substantially all of which is cash. Even after the increase in the dividend, we’re well-positioned financially to continue development of the Delhi field and also to capitalize on potential new acquisition…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jeff Grampp of Northland Capital Markets. Please go ahead.

First, I wanted to I guess get any kind of line of sight that you guys have on your end regarding the Phase 5 expansion and I think you guys kind of highlighted a little of the preliminary work that’s being done ahead of that. Is there any kind of line of sight towards when that project may be initiated from your end?

Well, I think the first step is we need to get this infill drilling program behind us. It will require some additional CO2 resources. And we’re somewhat limited on our overall recycle capacity in the field. We think that’s a 2019 calendar year project; that’s what our preliminary discussions with the operator has been. But, I think we’ll have better line of sight towards the end of the year, after we’ve got this infill drilling program completed. I think I would add that it remains an economic project; it does remain a project that the operator intends to execute. And, we do expect it; it’s just the timing is not firm at this point.

And then, on the M&A side, I think that’s highlighted getting revolver up to 40 million bucks. And I guess, just kind of wondering, how you guys are thinking about potential financing of any deals? I mean, is the revolver there, I guess, intended to be -- to permanently finance the deal or would that be kind of a shorter term opportunity to get something done and equity is a longer term option? I guess, generally, your appetite towards putting any leverage on the balance sheet is my question.

Well, we are not opposed to having debt on the balance sheet. And so, a portion of that -- a portion of any financing for a potential acquisition would likely be debt. It depends -- we want to maintain a very manageable leverage. My personal preference is that we stay about 1x, one times cash flow over a long-term period. But we could easily stretch to 1.5 or perhaps beyond in order to get a transaction done. But, then, we’d want to bring that back down either from repayment of debt through cash flow or potentially through the issuance of equity. Equity comes into play, if we talk about a longer term growth and a significant growth in the market cap and enterprise value of the company.

[Operator Instructions] Our next question comes from Jon Burke Amica of Insurance. Please go ahead.

I appreciate the big move in the dividend; that is definitely appreciated on our part. Is that just to kind of keep it at a similar targeted level of cash flow, given that cash flows are higher now with the production and obviously the move in oil, or is it somewhat leading into a bearishness on getting M&A prospects done?

It is clearly the former. We’ve seen a very significant increase in our cash available. And the target that I set internally is, we don’t want our dividend to be more than 50% of our estimated cash flow, EBITDA in the Company. Really, I’d like to keep it around 40%. We are under 50%, probably in the very low-40% range, based on our expectation, and obviously those are based on prices. But, no, I think we remain confident in our ability to execute. We’ve been very patient. We’ve actually been doing a lot of work in looking at potential acquisitions. We’ve been in an environment where we’ve seen a lot of deal flow for producing properties for two primary -- really, three primary functions or situations in the market. We’ve seen a lot of the MLPs that have exited Chapter 11, a lot of the very large MLPs exit Chapter 11 and seek to divest a lot their producing, legacy producing properties. We’ve also seen some private equity companies that whose growth prospects are limited and their sponsors are ready to exit and wrap those up. And thirdly, we’ve seen some of the large independents look to rationalize their portfolios as they want to pivot their spending into the more, in their view, higher rate of return plays more attractive plays, the Permian, the SCOOP/STACK, wherever the Bakken, mostly shale plays. And in fact, we noticed yesterday that Pioneer had made a strategic announcement that they are going to exit most of their other onshore properties over time to focus entirely on the Permian basin. So, those three factors have given us a lot of deal flow. But, we’ve been very patient. We are very disciplined about the rate of return that we want to see. And we just don’t feel a huge sense of urgency. We want to be patient and try to find the right deal.

And how has expectations changed on the sellers’ point of view since we’ve had this obviously big move in spot oil, obviously you go out on the forward curve and the move is much more moderate. So, has price expectation changed much?

Well, it has changed a bit and it’s really changed in two ways. There is obviously just a pure impact on the value, but it also has a more subtle impact on perception of the upside value. What may be economic to expand some of these projects that we’re looking at, we view as primarily PDP projects, but they may have certain potential upside that would come into play at a $70 oil price, as an example. And so, one of the struggles that we face is that as the price moves, sellers had a tendency to want to be compensated for some of that potential upside, whereas we’re trying to buy primarily on a cash flow basis. And I would add that that’s just true on the oil side because we’ve really seen a fairly weak market in the gas side. We got a little spike with the cold weather in January and then it’s pulled back since then. So, it’s truly just on the oil side on that.

Okay. And just as a reminder, you’re using a spot price deck, you’re not -- you don’t have like your own internal price deck when you do this?

We try to stay pretty close to the strip.

Okay.

Because that would give us the ability to hedge. We try not to deviate too far from prices that we could lock in, if we chose to do so.

Okay. All right, great. Yes. It’s great seeing the leverage here in the model with better prices. So, great quarter.

Thank you.

[Operator Instructions] This concludes the question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Well, thank you very much for participating in the call. I think, I’ve gone through all of the details, and happy to talk to shareholders individually as necessary. We look forward to next quarter’s call in early May. And, thank you very much.

This concludes today’s conference call. You may disconnect your line. Thank you for participating, and have a pleasant day.