Home Page
11:35:57 EST Sat 22 Nov 2014
Enter Symbol
or Name
USA
CA



EVOLUTION PETROLEUM CORP
Symbol U : EPM
Recent Sedar Documents

Evolution Petroleum Reports Results for Second Quarter of Fiscal 2013

2013-02-05 23:06 ET - News Release

Compared to our First Fiscal Quarter:
- Earnings per share climbed 81%
- Revenues 32% higher
- Delhi sales volumes up 36%

HOUSTON, Feb. 5, 2013 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE MKT: EPM) today reported operating highlights for the quarter ended December 31, 2012, its second quarter of fiscal 2013 ("Q2-13").

Highlights include:

  • Earned $1.8 million, or $0.06 per diluted share, an 81% sequential increase
  • Increased sales volumes 20% sequentially to 696 net barrels of oil equivalent ("BOE") per day
  • Delhi volumes increased 36% over prior quarter to 6,872 gross barrels of oil ("BO") per day (509 net)
  • Continued de-watering and de-pressuring our first two Mississippian Lime wells, a necessary prerequisite to achieve expected oil and gas production rates
  • Advanced the application of our GARP® technology

Robert Herlin, CEO, said: "We are pleased to report that Delhi production has not only sharply rebounded from the constraints of summer heat, it is also responding to prior year capital expenditures while continuing to outperform our original expectations. Both of our initial Mississippian Lime producers are taking longer to de-water and de-pressure than we originally expected, but both wells have begun to produce small, but increasing amounts of oil and liquids-rich gas. Since other operators in the area have reported similar dewatering results, we remain cautiously optimistic as to our projected reserves and expectations of increased drilling activity in the play later this fiscal year."

Mr. Herlin added: "Our strategy to increase underlying net asset value in a focused manner, without diluting shareholders, is clearly being reflected in our record earnings growth, excluding asset sales.  Further growth will be propelled by a major step change, when our 24% working interest at Delhi reverts back to us later this year and begins contributing substantial incremental net cash flow and earnings."      

Quarterly Financial Results

Quarterly earnings to common shareholders increased 81% to $1.8 million, or $0.06 per diluted share, compared to $1.0 million, or $0.03 per diluted share in the prior quarter. Net income to common shareholders increased 42% over the year-ago quarter.

Revenues increased 32% to $5.6 million compared to $4.3 million in the prior quarter, and increased 22% compared to the year-ago quarter. The increase over the prior quarter was primarily due to a higher rate of oil production. The increase over the year-ago quarter was due to higher oil production, offset by lower oil and NGL prices, and lower natural gas and NGL volumes.

Lease operating expense increased 33% to $0.4 million compared to the prior quarter due primarily to the addition of wells in our Mississippian Lime project and work-overs in the Giddings Field. Compared to the year ago quarter, lease operating expense was flat. On a BOE basis, lease operating expense during Q2-13 was $6.55 per BOE compared to $5.92 and $7.89 in the sequential and year-ago quarters. General and administrative expense increased 6% over the prior quarter to $1.8 million, and 22% over the year-ago quarter.  The increases were primarily due to higher bonus and board fee accruals, noncash stock expense, litigation and other legal expense and transaction costs related to divestments. Results for all periods included significant non-cash stock compensation expense, amounting to 22% of total general and administrative expense in the current quarter and 24% in the year-ago quarter.

Delhi Field, Louisiana

Gross sales volumes at Delhi increased dramatically during the current quarter and averaged 6,872 BO per day (509 net BO per day). Q2-13 volumes were 36% higher than the prior quarter and 39% higher than the year-ago quarter. The increase was due to resumption of normal production with the onset of cooler weather and to response from the capital expenditures in the project during the prior year. The operator is expected to add additional cooling capacity to the plant before summer temperatures return in 2013. Our net sales volumes from Delhi during Q2-13 were solely from our 7.4% royalty interest that bears no operating expense or capital expenditure. We continued to realize a significant premium in oil price that averaged more than $104 per barrel during the quarter, compared to the $90 per barrel we received in our other fields.

Current field production is outperforming the production rate projected in our June 30, 2012 independent reserves report, and we continue to expect that our 24% reversionary working interest will revert to Evolution during the second half of calendar 2013.  At reversion, our net revenue interest will more than triple from 7.4% to 26.5%, while our cost bearing working interest will increase from zero to 23.9%.  Based on performance, the operator has refocused calendar 2013 capital expenditures to expand the CO2 flood within the previously developed western half of the field in order to better capture the full potential from the reservoirs in that area, before completing the expansion of the CO2 flood in the balance of the eastern half of the field in 2014 and 2015.

Mississippian Lime Project, Oklahoma

Our first two Mississippian Lime wells were completed and hydraulically fractured during Q2-13. The Sneath #1H was placed on production at the end of October and the Hendrickson #1H late in November of 2013. Both wells produced saltwater at rates less than 3,000 barrels per day to begin reducing reservoir pressure and salt water content, a precursor to achieving projected oil and liquids-rich natural gas production. The high volumes of salt water are economically disposed into our joint venture's wholly owned disposal well.  Recently, the operator replaced the originally installed down hole pumps with higher capacity pumps to increase salt water production closer to the 10,000 barrel per day rate that other operators in the area have identified as sometimes required.  Reservoir pressure in each well has gradually declined and oil and gas production, while currently low, is increasing, suggesting that the wells are steadily depleting reservoir water and pressure, thus liberating oil and natural gas. Our independent reservoir engineer has assigned 112 additional gross drilling locations to our joint venture leasehold, and we plan to resume development pending the results of our first two wells in the play with the expectation of ramping-up our drilling program during the fourth fiscal quarter.

GARP® Technology Commercialization

We installed our GARP® artificial lift technology in the Select Lands #1 joint venture well in the Giddings Field during Q2-13 that, as previously announced, increased production from about 1 BOE per day to approximately 20 BOE per day. We are continuing the commercialization effort for GARP® and have reached tentative agreement to add another joint venture well in Giddings.  Discussions for additional GARP® applications in Giddings continue with our joint venture partners, and with various other companies active in other Texas fields.  We also recently began a program to acquire abandoned wells, solely for our own account, offering good potential for renewed production utilizing our GARP® technology.

Other Fields

One small sale and one larger sale of noncore assets in the Giddings Field were completed during Q2-13, including most of our non-GARP® production and undeveloped reserves in the Giddings Field. Proceeds included approximately $3.1 million before transaction costs, plus contingent payments based on future drilling activity. The larger sale for $2.8 million was completed December 24th, while the smaller sale was completed in early November.  Accordingly, Q2-13 results included most of the production, revenue and operating expense for the divested assets. Had the divestments been completed at the beginning of the quarter, net production in the Giddings Field would have been reduced by 75%, or 125 net BOE per day, to 42 net BOE per day.  Similarly, approximately $400,000 of revenue, $145,000 of direct well expense (using the company's average $5.24/BOE depletion rate) and $255,000 of pre-tax well income ($22/BOE) would have been absent in the current quarter's results.  The divested properties were high in natural gas and NGL content, averaging 80% of production volumes in the current quarter, and included approximately 350 MBOE of proved developed reserves and 1.8 MMBOE of proved undeveloped reserves as of June 30, 2012. Sale proceeds and staff are already being redeployed to our Mississippian Lime and GARP® projects.

The remaining noncore assets in the Giddings Field are being offered for sale, excluding certain wells in which our GARP® technology has been installed, and excluding our minor royalty and reversionary interests in the Woodbine play in northern Grimes County.

Our first two Mirando Sand oil wells in the Lopez Field in South Texas continue to produce at better than expected rates and a third lease oil well has begun to produce oil.  We completed the swap of our oil well and water injector well on our third lease and began production during Q2-13.  Although the performance to date has confirmed the project potential and we have numerous additional drilling locations, the long lead time to achieve material economic results in an expansion of the project outside of the Lopez Field has led to a noncore designation.

Capital Expenditures and Liquidity

Capital expenditures during the quarter were $4 million, invested primarily in our Mississippian Lime wells. We now expect that Fiscal 2013 capital expenditures will be reduced by about $3 million due to delayed drilling in the Mississippian Lime project that will carry over into the next year. 

At December 31, 2012, we had cash and cash equivalents of $18.0 million compared to $13.1 million as of the end of the first quarter and $14.4 million as of June 30, 2012.  Our current working capital of $18.0 million is more than sufficient to meet our projected capital expenditures during the balance of Fiscal 2013 and any likely expansions. We continue to be debt free.

Conference Call

Evolution Petroleum will host a conference call on Wednesday, February 6th at 11:00 a.m. Eastern Time (10:00 a.m.Central) to discuss results of the quarter. To access the call, please dial 1-800-860-2442, 1-412-858-4600 (International) or 1-866-605-3852 (Canada).  The conference call will also be broadcast live via the Internet and can be accessed through Evolution's corporate website at www.evolutionpetroleum.com.

About Evolution Petroleum

Evolution Petroleum Corporation develops incremental petroleum reserves and shareholder value by applying conventional and specialized technology to known oil and gas resources, onshore in the United States.   Principal assets as of June 30, 2012 include 13.4 MMBOE of proved reserves and 12.7 MMBOE of probable reserves with PV-10* of $445 million and $174 million, respectively, and no debt, before the effect of the Giddings Field divestments.  Producing assets include a CO2-EOR project with growing production in Louisiana's Delhi Field, and noncore producing properties and drilling locations in the Giddings Field of Central Texas and Lopez Field in South Texas.  Other assets include a 45% interest in a joint venture in the Mississippian Lime play in Oklahoma and a patented artificial lift technology designed to extend the life of horizontal wells with oil or associated water production.  Additional information, including the Company's annual report on Form 10-K and its quarterly reports on Form 10-Q, is available on its website at (www.evolutionpetroleum.com).

Cautionary Statement

All statements contained in this press release regarding potential results and future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update or review any forward-looking statement, whether as a result of new information, future events, or otherwise. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, those factors that are disclosed under the heading "Risk Factors" and elsewhere in our documents filed from time to time with the United States Securities and Exchange Commission and other regulatory authorities. Statements regarding our ability to complete transactions, successfully apply technology applications in the re-development of oil and gas fields, realize future production volumes, realize success in our drilling and development activity and forecasts of legal claims, prices, future revenues and income and cash flows and other statements that are not historical facts contain predictions, estimates and other forward-looking statements. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved and these statements will prove to be accurate. Important factors could cause actual results to differ materially from those included in the forward-looking statements.

* PV-10 of proved reserves is a pre-tax non-GAAP measure reconciled to the after-tax Standardized Measure of Future Net Cash Flows below.  We believe that the presentation of the non-GAAP financial measure of PV-10 provides useful and relevant information to investors because of its wide use by analysts and investors in evaluating the relative monetary significance of oil and natural gas properties, and as a basis for comparison of the relative size and value of our reserves to other companies' reserves.  We also use this pre-tax measure when assessing the potential return on investment related to oil and natural gas properties and in evaluating acquisition opportunities.  Because there are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, we believe the use of a pre-tax measure is valuable for evaluating our Company.  PV-10 is not a measure of financial or operating performance under GAAP, nor is it intended to represent the current market value of our estimated oil and natural gas reserves. PV-10 should not be considered in isolation or as a substitute for the Standardized Measure as defined under GAAP, and reconciled below.  Probable reserves are not recognized by GAAP, and therefore the PV-10 of probable reserves cannot be reconciled to a GAAP measure.

The following table provides a reconciliation of PV-10 of each of our proved properties to the Standardized Measure.


For the Years Ended June 30




2012


2011











Estimated future net revenues

$

858,510,526


$

741,212,773



10% annual discount for estimated timing of future cash flows


(412,995,901)



(365,874,315)



Estimated future net revenues discounted at 10% (PV-10)


445,514,625



375,338,458



Estimated future income tax expenses discounted at 10%


(161,917,132)



(146,890,504)



Standardized Measure

$

283,597,493


$

228,447,954



 

 - Financial Tables to Follow -

 

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Statements of Operations

(Unaudited)










Three Months Ended



Six Months Ended




December 31,



December 31,




2012



2011



2012



2011


Revenues













Crude oil

$

5,379,399


$

4,231,201


$

9,384,821


$

7,679,796


Natural gas liquids


86,556



182,971



206,167



371,426


Natural gas


182,103



232,530



348,616



480,336


Total revenues


5,648,058



4,646,702



9,939,604



8,531,558















Operating Costs













Lease operating expenses


419,328



412,470



735,497



615,387


Production taxes


20,863



18,725



42,236



32,760


Depreciation, depletion and amortization


350,119



280,795



647,036



517,686


Accretion of discount on asset retirement obligations


17,751



19,616



38,858



36,588


General and administrative expenses *


1,815,276



1,488,258



3,520,700



2,893,433


Total operating costs


2,623,337



2,219,864



4,984,327



4,095,854















Income from operations


3,024,721



2,426,838



4,955,277



4,435,704















Other













Interest income


5,614



6,712



11,230



13,958


Interest (expense)


(16,564)



---



(32,992)



---




(10,950)



6,712



(21,762)



13,958















Net income before income taxes


3,013,771



2,433,550



4,933,515



4,449,662















Income tax provision


1,054,499



1,008,195



1,814,717



1,880,789















Net Income

$

1,959,272


$

1,425,355


$

3,118,798


$

2,568,873















Dividends on Preferred Stock


168,576



165,405



337,151



293,240















Net income available to common shareholders

$

1,790,696


$

1,259,950


$

2,781,647


$

2,275,633















Basic

$

0.06


$

0.05


$

0.10


$

0.08















Diluted

$

0.06


$

0.04


$

0.09


$

0.07















Weighted average number of common shares


























Basic


28,071,317



27,792,768



28,032,223



27,731,062















Diluted


31,856,417



31,515,271



31,836,983



31,394,528



* General and administrative expenses for the three months ended December 31, 2012 and 2011 included non-cash stock-based compensation expense of $393,579 and $354,871, respectively.  For the corresponding six month period's non-cash stock-based compensation expense was $747,369 and $771,566, respectively.

 

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Balance Sheets

(Unaudited)








December 31,


June 30,



2012


2012


Assets







Current assets







Cash and cash equivalents

$

18,029,838


$

14,428,548


Certificates of deposit


250,000



250,000


Receivables







Oil and natural gas sales


2,141,280



1,343,347


Joint interest partner


24,871



96,151


Income taxes


92,885



92,885


Other


306



190


Deferred tax asset


162,746



325,235


Prepaid expenses and other current assets


184,842



233,433


Total current assets


20,886,768



16,769,789









Property and equipment, net of depreciation, depletion, and amortization







Oil and natural gas properties — full-cost method of accounting, of which $9,031,522 and $6,042,094 at December 31, 2012 and June 30, 2012, respectively, were excluded from amortization.           


40,276,684



40,476,172


Other property and equipment


68,031



92,271


Total property and equipment


40,344,715



40,568,443









Advances to joint interest operating partner


--



1,366,921


Other assets


269,758



250,333









Total assets

$

61,501,241


$

58,955,486









Liabilities and Stockholders' Equity







Current liabilities







Accounts payable

$

415,489


$

407,570


Due joint interest partner


1,383,991



3,217,975


Accrued compensation


609,350



1,005,624


Royalties payable


219,137



294,013


Income taxes payable


137,924



91,967


Other current liabilities


170,873



71,768


Total current liabilities


2,936,764



5,088,917









Long term liabilities







Deferred income taxes


7,541,364



6,205,093


Asset retirement obligations


826,840



968,677


Deferred rent


61,437



70,011









Total liabilities


11,366,405



12,332,698









Commitments and contingencies (Note 11)














Stockholders' equity







Preferred stock, par value $0.001; 5,000,000 shares authorized:8.5% Series A Cumulative Preferred Stock, 1,000,000 shares authorized, 317,319 shares issued and outstanding at December 31, 2012, and June 30, 2012 with a liquidation preference of $25.00 per share


317



317


Common stock; par value $0.001; 100,000,000 shares authorized: issued 28,897,133 shares at December 31, 2012, and 28,670,424 at June 30, 2012; outstanding 28,106,796 shares and 27,882,224 shares as of December 31, 2012 and June 30, 2012, respectively


28,897



28,670


Additional paid-in capital


30,164,056



29,416,914


Retained earnings


20,840,556



18,058,909




51,033,826



47,504,810


Treasury stock, at cost, 790,337 shares and 788,200 shares as of December 31, 2012  and June 30, 2012, respectively


(898,990)



(882,022)









Total stockholders' equity


50,134,836



46,622,788









Total liabilities and stockholders' equity

$

61,501,241


$

58,955,486


 

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(Unaudited)








Six Months Ended

December 31,




2012


2011


Cash flows from operating activities








Net Income


$

3,118,798


$

2,568,873


Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation, depletion and amortization



667,461



517,686


Stock-based compensation



747,369



771,566


Accretion of discount on asset retirement obligations



38,858



36,588


Settlements of asset retirement obligations



(47,026)



(30,969)


Deferred income taxes



1,498,760



1,258,106


Deferred rent



(8,574)



(6,829)


Changes in operating assets and liabilities:








Receivables from oil and natural gas sales



(797,933)



(402,023)


Receivables from income taxes and other



(116)



20,889


Due to/from joint interest partner



40,050



6,854


Prepaid expenses and other current assets



48,591



(102,360)


Accounts payable and accrued expenses



(390,979)



(307,079)


Royalties payable



(74,876)



(122,225)


Income taxes payable



115,801



93,279


Net cash provided by operating activities



4,956,184



4,302,356










Cash flows from investing activities








Proceeds from asset sales



3,054,976




Acquisitions of oil and natural gas properties



(943,196)



(174,604)


Development of oil and natural gas properties



(3,070,234)



(1,329,930)


Capital expenditures for other property and equipment



--



(12,778


Advances to joint venture operating partner



--




Other assets



(26,110



(23,657)


Net cash used in investing activities



(984,564)



(1,540,969)










Cash flows from financing activities








Proceeds from issuances of preferred stock, net





6,930,535


Preferred stock dividends paid



(337,151)



(293,240)


Purchases of treasury stock



(16,968)




Deferred loan costs



(16,211)




Net cash provided by (used in) financing activities



(370,330)



6,637,295










Net increase in cash and cash equivalents



3,601,290



9,398,682










Cash and cash equivalents, beginning of period



14,428,548



4,247,438










Cash and cash equivalents, end of period


$

18,029,838


$

13,646,120


Our supplemental disclosures of cash flow information for the three months ended December 31, 2012 and 2011 are as follows:



Six Months Ended




December 31,




2012


2011


Income taxes paid


$

200,156


$

513,581










Non-cash transactions:








Change in accounts payable used to acquire oil and natural gas leasehold interests and develop oil and natural gas properties



31,885



449,146


Change in due to joint interest partner used to acquire oil and natural gas leasehold interests and develop oil and natural gas properties



(435,833)




Change in accounts payable related to joint venture activities





9,576


Oil and natural gas properties incurred through recognition of asset retirement obligations



8,558



47,200


 

Results of Operations – Quarter












Three Months Ended









December 31,





%




2012


2011


Variance


Change















Sales Volumes, net to the Company:


























Crude oil (Bbl)



52,270



37,514



14,756


39.3

%














NGLs (Bbl)



2,378



3,145



(767)


(24.4)

%














Natural gas (Mcf)



56,210



69,880



(13,670)


(19.6)

%

Crude oil, NGLs and natural gas (BOE)



64,016



52,306



11,710


22.4

%














Revenue data:


























Crude oil


$

5,379,399


$

4,231,201


$

1,148,198


27.1

%














NGLs



86,556



182,971



(96,415)


(52.7)

%














Natural gas



182,103



232,530



(50,427)


(21.7)

%

Total revenues


$

5,648,058


$

4,646,702


$

1,001,356


21.5

%














Average price:













Crude oil (per Bbl)


$

102.92


$

112.79


$

(9.87)


(8.8)

%

NGLs (per Bbl)



36.40



58.18



(21.78)


(37.4)

%

Natural gas (per Mcf)



3.24



3.33



(0.09)


(2.7)

%

Crude oil, NGLs and natural gas (per BOE)


$

88.23


$

88.84


$

(0.61)


(0.7)

%














Expenses (per BOE)













Lease operating expenses


$

6.55


$

7.89


$

(1.34)


(17.0)

%

Production taxes


$

0.33


$

0.35


$

(0.02)


(5.7)

%

Depletion expense on oil and natural gas properties (a) 


$

5.24


$

5.20


$

0.04


0.8

%



(a)

Excludes depreciation of office equipment, furniture and fixtures, and other assets of $14,462 and $8,723, for the three months ended December 31, 2012 and 2011, respectively.

 

Results of Operations – YTD












Six Months Ended









December 31,





%




2012


2011


Variance


Change















Sales Volumes, net to the Company:


























Crude oil (Bbl)



91,352



70,674



20,678


29.3

%














NGLs (Bbl)



5,759



6,666



(907)


(13.6)

%














Natural gas (Mcf)



122,079



130,597



(8,518)


(6.5)

%

Crude oil, NGLs and natural gas (BOE)



117,457



99,106



18,351


18.5

%














Revenue data:


























Crude oil


$

9,384,821


$

7,679,796


$

1,705,025


22.2

%














NGLs



206,167



371,426



(165,259)


(44.5)

%














Natural gas



348,616



480,336



(131,720)


(27.4)

%

Total revenues


$

9,939,604


$

8,531,558


$

1,408,046


16.5

%














Average price:













Crude oil (per Bbl)


$

102.73


$

108.67


$

(5.93)


(5.5)

%

NGLs (per Bbl)



35.80



55.72



(19.92)


(35.8)

%

Natural gas (per Mcf)



2.86



3.68



(0.82)


(22.4)

%

Crude oil, NGLs and natural gas (per BOE)


$

84.62


$

86.09


$

(1.47)


(1.7)

%














Expenses (per BOE)













Lease operating expenses


$

6.26


$

6.21


$

0.05


0.8

%

Production taxes


$

0.36


$

0.33


$

0.03


9.1

%

Depletion expense on oil and natural gas properties (a) 


$

5.28


$

5.06


$

0.22


4.4

%



(a)

Excludes depreciation of office equipment, furniture and fixtures, and other assets of $26,711 and $16,552 for the six months ended December 31, 2012 and 2011, respectively.

 

Company Contact:
Sterling McDonald, VP & CFO
(713) 935-0122
smcdonald@evolutionpetroleum.com

 

SOURCE Evolution Petroleum Corporation

© 2014 Canjex Publishing Ltd. All rights reserved.