-- Production increases by 11% sequentially -- CO2 injection
expected to begin this week at Delhi EOR project HOUSTON, Nov. 12
/PRNewswire-FirstCall/ -- Evolution Petroleum Corporation (NYSE
Amex : EPM) today reported financial and operating results for the
three months ended September 30, 2009, the first quarter of the
Company's fiscal year ("Q1-10"). Oil and gas volumes in Q1-10
increased 3% to 35,004 barrels of oil equivalent ("BOE"), or 380
BOE per day, compared to the three months ended September 30, 2008
("Q1-09"). Revenues in Q1-10 were $1.2 million compared to $2.9
million for Q1-09, due to a 61% decline in blended oil and gas
prices from $85.51 per BOE to $33.43 per BOE, partially offset by
the increased sales volumes. The increase in volumes was the result
of drilling and work-over operations in the Giddings Field in
central Texas, primarily the drilling of two re-entry wells in
January 2009. Sequentially compared to Q4-09, volumes were 11%
higher and revenues 19% higher for Q1-10, in large part due to
lower natural gas production in Q4-09 resulting from problems with
the gas purchaser's compressor serving the company's most
significant well, the Pearson. That issue has been corrected,
returning the well to a normal production profile for most of the
quarter. The sequential revenue increase was also due to a 7%
improvement in product prices realized in Q1-10 versus Q4-09. Net
loss in Q1-10 was $0.7 million, or $(0.03) per share, compared to
net income in Q1-09 of $148,437, or $0.01 per diluted share.
Results for both periods included $0.62 million and $0.64 million,
respectively, in non-cash depreciation, depletion and amortization,
plus non-cash stock-based compensation expense of approximately
$0.39 million and $0.52 million charged in Q1-10 and Q1-09,
respectively. Cash flows from operations were $324,250 during Q1-10
compared to $2.2 million during Q1-09. Working capital was $6.6
million on September 30, 2009, as compared to $7.6 million at June
30, 2009. The $1.0 million decrease was primarily due to
investments of $1.1 million in oil and natural gas properties.
Working capital at the end of Q1-10 included $5.1 million of cash,
cash equivalents and short-term certificates of deposit, and $2.1
million of income taxes that are recoverable through a tax loss
carry-back against income taxes paid for the year ended June 30,
2007. The company ended the fiscal first quarter with no
outstanding debt. All capital expenditures during the quarter were
funded from working capital. Robert Herlin, President and Chief
Executive Officer, commented, "We are very pleased to have reached
this important milestone in the development of our enhanced oil
recovery project at Delhi, advancing our 13.6 million net barrels
of probable oil reserves toward production. The operator announced
last week that the Delta CO2 Pipeline has been completed and fully
pressured with CO2, and that CO2 injection is scheduled to begin by
the end of this week. First oil production response is expected by
mid-calendar 2010." Mr. Herlin further added "We initiated field
operations in our first Neptune oil project in the Lopez Field of
South Texas by drilling and completing our first well and drilling
to total depth our second well. We expect first field production
and the drilling and completion of a third well by the end of our
second fiscal quarter. One of these wells will be utilized for
pressure maintenance through re-injection of produced water.
Establishing production here will not only add oil production, but
potentially allow us to upgrade additional reserves to the proved
category. Furthermore, we increased our net acreage position in the
Lopez Field by 14% to 1,710 net acres on very favorable terms,
potentially adding 10-13 additional drilling locations to our
previous inventory of approximately 100 potential drilling
locations." All of the Giddings wells appear to have completed
their initial period of steep production declines, and net
production increased during the first quarter to 380 net BOE per
day compared to 371 BOE per day in Q1-09. Consequently, net
production is expected during the second quarter to exhibit a
relatively mild decline. In particular, the Pearson, the Company's
best well, has stabilized at a productive gross rate of 1.3 MMCFE
per day of high BTU gas that is very close to its initial
production rate in January 2009. EPM also completed a water
disposal well in the Giddings Field that is expected to reduce
operating expenses by about $40,000 per month. The approved capital
budget for fiscal 2010 provides for a number of well workovers to
maintain or increase production, several of which are scheduled for
the second quarter. EPM continues to successfully test its
proprietary lift technology, which was first installed in June to
demonstrate substantially improved fluid production in an otherwise
fully depleted reservoir. The Company is installing this technology
on a second EPM well in the Giddings Field and has initiated
discussions to install the technology on third party wells. EPM is
continuing its test program in the shallow Woodford and Caney gas
shales in Wagoner County, Oklahoma. Initial tests have demonstrated
that both the Woodford and Caney gas shales are productive.
Accordingly, EPM has scheduled larger hydraulic fracs with the
addition of proppant in two wells, separately testing the Woodford
and Caney reservoirs to determine peak initial production rates and
decline profiles. The results should allow the Company to design
the appropriate development program, facilities and gathering
system. Later in the fiscal year, market conditions permitting, EPM
plans to re-enter a well in its mid-depth project in Haskell
County, OK to begin testing the Woodford and Caney Shale reservoirs
between 4,000' and 5,000' depth. Production Volumes and Prices: Net
volumes for Q1-10 were 16,441 barrels ("Bbl") of oil, condensate
and natural gas liquids ("NGL") and 111.4 million cubic feet of
natural gas ("MMCF"), or 35,004 BOE. This is an increase of 3% over
volumes for Q1-09 of 23,898 Bbls of oil, condensate and NGLs and
61.1 MMCF of natural gas, or 34,089 BOE. The average realized price
of oil fell 46% to $66.46 per barrel in Q1-10 from $123.03 per
barrel in Q1-09, while the average realized price of NGLs fell 53%
in Q1-10 to $32.16 per barrel from $68.29 per barrel in Q1-09. The
average realized price of natural gas fell 64% to $3.43 per Mcf in
Q1-10 versus $9.49 per Mcf in Q1-09. On a BOE basis, the blended
effective price received declined 61% to $33.43 in Q1-10 from
$85.51 in Q1-09, due in part to Q1-10 sales including a higher
portion of natural gas. Costs and Expenses Lease operating expenses
("LOE"), including production severance taxes, for Q1-10 were
declined 9% to $0.38 million ($10.95 per BOE) compared to $0.42
million ($12.38 per BOE) for Q1-09, due primarily to lower
production taxes. Depreciation, Depletion & Amortization
Expense ("DD&A") was $0.62 million ($17.17 per BOE) for Q1-10
compared to $0.64 million ($18.63 per BOE) in Q1-09, due primarily
to a reduction in projected capital expenditures associated with
proved undeveloped locations that more than offset reduced proved
reserves resulting from lower gas prices reported in the July 1,
2009 reserves report. Going forward, LOE should reflect the cost
savings from the recently completed water disposal well in the
Giddings Field, partially offset by the operating costs of new
wells in the Lopez Field and in Wagoner County, OK. General and
administrative ("G&A") expenses declined to $1.3 million for
Q1-10, as compared to $1.5 million for Q1-09, due to a decrease in
non-cash stock-based compensation expense, which was $0.39 million
(31% of total G&A) and $0.52 million (36% of total G&A) for
Q1-10 and Q1-09, respectively, and a 15% reduction in full-time
employees. Settlement of litigation related to the Delhi Field
during Q4-09 should positively impact G&A expenses going
forward. Conference Call Evolution Petroleum will host a conference
call today at 11:00 a.m. Eastern Time (10:00 a.m. Central) to
discuss its fiscal first quarter 2010 results. To access the call,
please dial 480-629-9820 and ask for the Evolution Petroleum call
at least 10 minutes prior to the start time. The conference call
will also be broadcast live via the Internet and can be accessed
through the investor relations section of Evolution's corporate
website, http://www.evolutionpetroleum.com/, where it will also be
archived for replay. A telephonic replay of the conference call
will be available until November 19, 2009 and may be accessed by
calling 303-590-3030 and using the pass code 4181633#. For more
information, please contact Donna Washburn at DRG&E at (713)
529-6000 or email at . About Evolution Petroleum Evolution
Petroleum Corporation (http://www.evolutionpetroleum.com/) acquires
known, onshore oil and gas resources and applies conventional and
specialized technology to accelerate production and develop
incremental reserves and value. The Company is well positioned to
continue its development projects in CO2 based EOR, bypassed
resources and low cost shale gas. Principal assets as of July 1,
2009 include 3.9 MMBOE of proved and probable reserves in the
Giddings Field of Central Texas, 0.5 MMBO of proved and unproved
reserves with 90+ additional locations in South Texas, 13.6 MMBO of
probable reserves in the Delhi CO2-EOR project in northeast
Louisiana, 17,600 net acres of leases in shallow gas shale in
Eastern Oklahoma and our proprietary artificial lift technology.
Additional information, including the Company's annual report on
Form 10-K and its quarterly reports on Form 10-Q, can be accessed
on its website. 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 volumes, realize success in our
drilling and development activity, 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.
Tables to Follow - Evolution Petroleum Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited) Three Months
Ended September 30, ------------------ 2009 2008 ---- ---- Revenues
Crude oil $503,122 $1,579,070 Natural gas liquids 285,311 755,445
Natural gas 381,594 580,471 ------- ------- Total revenues
1,170,027 2,914,986 --------- --------- Operating Costs Lease
operating expenses 364,846 335,904 Production taxes 18,367 85,996
Depreciation, depletion and amortization 617,757 644,882 Accretion
of asset retirement obligations 14,338 5,737 General and
administrative expenses * 1,253,116 1,464,840 --------- ---------
Total operating costs 2,268,424 2,537,359 --------- ---------
(Loss) income from operations (1,098,397) 377,627 Other income
Interest income 15,224 73,646 ------ ------ Net (loss) income
before income tax benefit (provision) (1,083,173) 451,273 Income
tax benefit (provision) 378,348 (302,836) ------- -------- Net
(loss) income $(704,825) $148,437 ========= ======== (Loss)
earnings per common share Basic and Diluted $(0.03) $0.01 ======
===== Weighted average number of common shares Basic 26,646,022
26,892,311 Diluted 26,646,022 29,254,273 *General and
administrative expenses for the year ended September 30, 2009 and
2008 included non cash stock-based compensation expense of $391,636
and $523,725, respectively. Evolution Petroleum Corporation and
Subsidiaries Consolidated Balance Sheets (Unaudited) September 30,
June 30, 2009 2009 ------------ ------------ Assets Current assets
Cash and cash equivalents $2,973,314 $3,891,764 Certificates of
deposit 2,166,359 2,059,147 Receivables Oil and natural gas sales
510,063 532,318 Income taxes - - Other 100,110 172,314 Income taxes
recoverable 2,094,628 2,055,802 Prepaid expenses and other current
assets 120,690 162,441 ------- ------- Total current assets
7,965,164 8,873,786 --------- --------- Property and equipment, net
of depreciation, depletion, and amortization Oil and natural gas
properties - full-cost method of accounting, of which $10,163,615
and $9,819,465 at September 30, 2009 and June 30, 2009,
respectively, were excluded from amortization. 29,322,754
28,751,178 Other property and equipment 134,070 150,697 -------
------- Total property and equipment 29,456,824 28,901,875
---------- ---------- Other assets 54,566 53,162 ------ ------
Total assets $37,476,554 $37,828,823 =========== ===========
Liabilities and Stockholders' Equity Current liabilities Accounts
payable $799,853 $690,639 Accrued compensation 45,319 71,427
Royalties payable 253,819 218,477 State taxes payable 157,736
157,736 Other current liabilities 102,558 99,625 ------- ------
Total current liabilities 1,359,285 1,237,904 Long term liabilities
Deferred income taxes 3,381,795 3,721,317 Asset retirement
obligations 737,827 664,710 Stock bonus - 370,440 Accrued
compensation 105,000 - Deferred rent 78,802 77,858 ------ ------
Total liabilities 5,662,709 6,072,229 --------- ---------
Commitments and contingencies Stockholders' equity Preferred stock,
par value $0.001; 5,000,000 shares authorized; no shares issued or
outstanding - - Common stock; par value $0.001; 100,000,000 shares
authorized; issued 27,781,338 shares and 27,318,517 shares as of
September 30, 2009 and June 30, 2009, respectively; outstanding
26,993,138 shares and 26,530,317 shares as of September 30, 2009
and June 30, 2009, respectively. 27,781 27,318 Additional paid-in
capital 17,186,481 16,424,868 Retained earnings 15,481,605
16,186,430 ---------- ---------- 32,695,867 32,638,616 Treasury
stock, at cost, 788,200 shares as of September 30, 2009 and June
30, 2009. (882,022) (882,022) -------- -------- Total stockholders'
equity 31,813,845 31,756,594 ---------- ---------- Total
liabilities and stockholders' equity $37,476,554 $37,828,823
=========== =========== Evolution Petroleum Corporation and
Subsidiaries Consolidated Statements of Cash Flow (Unaudited) Three
Months Ended September 30, ------------------ 2009 2008 ---- ----
Cash flows from operating activities Net (loss) income (704,825)
$148,437 Adjustments to reconcile net (loss) income to net cash
provided by operating activities: Depreciation, depletion and
amortization 617,757 644,882 Stock-based compensation 391,636
523,725 Accretion of asset retirement obligations 14,338 5,737
Deferred income taxes (339,522) 302,836 Deferred rent 944 944 Other
103,596 1,559 Changes in operating assets and liabilities
Receivables from oil and natural gas sales 22,256 1,167,557
Receivables from income taxes and other 33,378 265,798 Prepaid
expenses and other current assets 41,751 (238,650) Accounts payable
and accrued expenses 107,600 (466,478) Royalties payable 35,342
(135,857) ------ -------- Net cash provided by operating activities
324,250 2,220,490 ------- --------- Cash flows from investing
activities Development of oil and natural gas properties
(1,090,298) (2,836,572) Acquisitions of oil and natural gas
properties (45,190) (1,111,640) Capital expenditures for other
equipment - (25,509) Purchases of certificates of deposit (107,212)
- -------- --- Net cash used in investing activities (1,242,700)
(3,973,721) ---------- ---------- Cash flows from financing
activities Proceeds from the issuance of common stock - - --- ---
Net cash provided by financing activities - - --- --- Net decrease
in cash and cash equivalents (918,450) (1,753,231) Cash and cash
equivalents, beginning of period 3,891,764 11,272,280 ---------
---------- Cash and cash equivalents, end of period $2,973,314
$9,519,049 ========== ========== Our supplemental disclosures of
cash flow information for the three months ended September 30, 2009
and 2008 are as follows: Three Months Ended September 30,
------------------ 2009 2008 ---- ---- Income taxes paid $ -
$15,000 Income tax refunds received $ - 322,869 Non-cash
transactions Increase (decrease) in accounts payable used to
acquire oil and natural gas leasehold interests and develop oil and
natural gas properties: $(21,561) $(1,509,789) Oil and natural gas
properties incurred through recognition of asset retirement
obligations: $58,779 $107,751 Common stock issued in lieu of a
portion of 2008 cash bonus accrued at June 30, 2008: $ - $168,462
Evolution Petroleum Corporation and Subsidiaries Condensed
Operating Data (Unaudited) Three Months Ended September 30
------------------ % 2009 2008 Variance change ---- ---- --------
------ Sales Volumes, net to the Company: Crude oil (Bbl) 7,570
12,835 (5,265) (41) % NGLs (Bbl) 8,871 11,063 (2192) (20) % Natural
gas (Mcf) 111,380 61,146 50,234 82 % ------- ------ ------ -- Crude
oil, NGLs and natural gas (BOE) 35,004 34,089 915 3 % Revenue data:
Crude oil $503,122 $1,579,070 $(1,075,948) (68) % NGLs 285,311
755,445 (470,134) (62) % Natural gas 381,594 580,471 (198,877) (34)
% ------- ------- -------- ---- Total revenues $1,170,027
$2,914,986 $(1,744,959) (60) % Average price: Crude oil (per Bbl)
$66.46 $123.03 $(56.57) (46) % NGLs (per Bbl) 32.16 68.29 (36.13)
(53) % Natural gas (per Mcf) 3.43 9.49 (6.06) (64) % ---- ----
----- ---- Crude oil, NGLs and natural gas (per BOE) $33.43 $85.51
$(52.08) (61) % Expenses (per BOE) Lease operating expenses and
production taxes $10.95 $12.38 $(1.43) (12) % Depletion expense -
oil and natural gas properties(a) $17.17 $18.63 $(1.46) (8) % (a)
Excludes depreciation of office equipment, furniture and fixtures,
and other of $16,627 and $9,824, for the three months ended
September 30, 2009 and 2008, respectively. Company Contact:
Sterling McDonald, VP & CFO (713) 935-0122 Lisa Elliott / Jack
Lascar / DRG&E / 713-529-6600 DATASOURCE: Evolution Petroleum
Corporation CONTACT: Sterling McDonald, VP & CFO, Evolution
Petroleum Corporation, +1-713-935-0122, ; Lisa Elliott, , Jack
Lascar, , both of DRG&E, +1-713-529-6600 Web Site:
http://www.evolutionpetroleum.com/
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