Organization and Basis of Preparation

9 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations. Evolution Petroleum Corporation is an oil and natural gas company focused on delivering a sustainable dividend yield to its stockholders through the ownership of and investment in oil and natural gas properties. The Company's long-term goal is to build a diversified portfolio of oil and natural gas properties primarily through acquisitions while seeking opportunities to maintain and increase production through selective development, production enhancement, and other exploitation efforts on its oil and natural gas properties.

The Company's producing properties consist of interests in the Barnett Shale located in North Texas, a natural gas producing shale reservoir; interests in the Delhi Holt-Bryant Unit in the Delhi field in Northeast Louisiana, a CO2 enhanced oil recovery ("EOR") project; interests in the Williston Basin in North Dakota, a producing oil and natural gas reservoir; interests in the Hamilton Dome field located in Hot Springs County, Wyoming, a secondary recovery field utilizing water injection wells to pressurize the reservoir; and small overriding royalty interests in four onshore Texas wells.

Interim Financial Statements. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the appropriate rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. All adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented have been included. The interim financial information and notes hereto should be read in conjunction with the Company’s 2021 Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as filed with the SEC on September 14, 2021. The results of operations for interim periods are not necessarily indicative of results to be expected for a full fiscal year. The Company has evaluated events and transactions through the date of issuance of these unaudited consolidated condensed financial statements.

Principles of Consolidation and Reporting. The Company's unaudited consolidated condensed financial statements include the accounts of Evolution Petroleum Corporation and its wholly owned subsidiaries (the "Company"). All significant intercompany transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to match current year presentation.

Risks and Uncertainties. None of the Company's ownership interests are operated by the Company and involve other third-party working interest owners. As a result, the Company has a limited ability to influence or control the operation or future development of such properties. However, the Company is proactive with its third-party operators to review spending and alter plans as appropriate.

The Company is continuously monitoring the current and potential impacts of the novel coronavirus ("COVID-19") pandemic on its business, including how it has and may continue to impact its financial results, liquidity, employees, and the operations of the properties which it holds a non-operated interest.

In response to the COVID-19 pandemic, the Company focused on putting long-term measures in place to prevent future disruptions, maintaining its operations and system of controls remotely, and implemented its business continuity plan to allow its employees to securely work from home or in the corporate office, located in Houston, Texas. The Company has been able to transition the operation of its business with minimal disruption and has maintained its system of internal controls and procedures.

Use of Estimates. The preparation of the Company's unaudited consolidated condensed financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities, if any, at the date of the unaudited consolidated condensed financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Significant estimates include (a) reserve quantities and estimated future cash flows associated with proved reserves, which may significantly impact depletion expense and potential impairments of oil and natural gas properties, (b) asset retirement obligations, (c) stock-based compensation, (d) fair values of derivative assets and liabilities, (e) income taxes and the valuation of deferred tax assets, (f) commitments and contingencies, and (g) crude oil, natural gas, and natural gas liquids ("NGL") revenues. The Company analyzes estimates and judgments based on historical experience and various other assumptions and information that are believed to be reasonable. Estimates and assumptions about future events and their effects cannot be predicted with certainty

and, accordingly, these estimates may change as additional information is obtained, as new events occur, and as the Company's environment changes. Actual results may differ from the estimates and assumptions used in the preparation of the Company's unaudited consolidated condensed financial statements.

Correction of Immaterial Error

The Company has identified an issue related to its historical process of calculating the Company's earnings (loss) per common share (“EPS”). The Company grants restricted stock awards which entitle the recipient to all of the rights of a shareholder of the Company including non-forfeitable rights to receive all dividends or other distributions paid with respect to such shares. Unvested restricted stock is forfeitable until earned and therefore not considered outstanding for basic EPS. Because restricted stock awards have the non-forfeitable right to share in dividends and earnings with common shareholders prior to vesting, the Company must apply the two-class method of allocating distributed and undistributed earnings to unvested restricted stock and outstanding common shares. The Company has not been applying the two-class method of calculating basic and diluted EPS in accordance with Accounting Standards Codification ("ASC") Topic 260, Earnings Per Share. Rather, the Company was considering all restricted stock grants as outstanding at the time of issuance in the calculation of EPS.

At March 31, 2022, the Company has determined that its unvested restricted stock awards are participating securities which contain non-forfeitable rights to dividends. As a result, the Company is required to adjust “Net income (loss) attributable to common stockholders” to allocate dividends paid to unvested shares as well as undistributed earnings. In addition, the Company has determined that its basic and diluted weighted average shares outstanding were also not adjusted correctly to reflect these participating securities.

The Company concluded the adjustments were immaterial to its 2021 annual and interim financial statements and its 2022 interim financial statements in accordance with the guidance in SEC Staff Accounting Bulletin (SAB) No. 99 "Materiality" and SAB No. 108 "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements." The correction resulted in a decrease of $0.01 per basic and diluted share for the nine months ended March 31, 2021. See Note 13, “Earnings (Loss) per Common Share” for more details.

The Company noted the following adjustments to its Earnings (loss) per common share presentation for the three and nine months ended March 31, 2021:


	Three Months Ended		Nine Months Ended
	March 31, 2021		March 31, 2021
As reported:
Net income (loss) for earnings per share calculation	$	1,191,001	$	(18,654,154)

Weighted average number of common shares outstanding — Basic	33,496,372		33,184,041
Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share	33,496,372		33,184,041

Net earnings (loss) per common share — Basic	$	0.04	$	(0.56)
Net earnings (loss) per common share — Diluted	$	0.04	$	(0.56)

Restated:
Net income (loss) for earnings per share calculation
	$	1,166,887	$	(18,689,432)
Weighted average number of common shares outstanding — Basic	32,817,999		32,743,070
Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share	32,891,380		32,743,070

Net earnings (loss) per common share — Basic	$	0.04	$	(0.57)
Net earnings (loss) per common share — Diluted	$	0.04	$	(0.57)