HOUSTON, TX / ACCESSWIRE / November 7, 2016 / Evolution Petroleum Corporation (NYSE MKT: EPM) announced today that its Board of
Directors increased the quarterly cash dividend to common shareholders by 30%, to $0.065 per share, a rate of $0.26 per share on an
annualized basis. The quarterly dividend will be payable on December 30, 2016 to shareholders of record as of the close of business
on December 15, 2016.
EPM also reported financial and operating highlights for its fiscal first quarter ended September 30, 2016, with comparisons to
the fiscal fourth quarter ended June 30, 2016 (the "prior quarter") and the quarter ended September 30, 2015 (the "year-ago
quarter").
Highlights:
- We reported net income of $1.8 million in the current quarter. Our net income to common shareholders was $0.6
million, or $0.02 per share, which includes a nonrecurring, noncash deemed dividend of $1.0 million related to the redemption of
our preferred stock and $0.3 million of final dividends on the preferred stock, or $0.04 per share in the aggregate. - We paid our
twelfth consecutive quarterly cash dividend on common shares and announced a 30% increase in the dividend for the next quarter. -
Gross production in the Delhi field increased 5.8% over the prior quarter, to 7,371 barrels of oil equivalent per day ("BOEPD")
from 6,964 BOEPD, primarily from conformance and production enhancement operations. This production does not yet include expected
volumes from the new Delhi NGL plant, which is scheduled for completion and start-up by the end of the calendar year. - Our net
production increased to 1,935 BOEPD after a small 0.2% (.002) adjustment to our net revenue interest from the June 2016 litigation
settlement. Our average realized price per equivalent barrel was $42.66, down slightly from the $42.87 average price in the prior
quarter. - We announced the redemption of all of our 8.5% Series A Cumulative Preferred Stock. Annual preferred dividend savings
will amount to $674,302 per year, or $0.02 per common share. - We ended the quarter with $19.6 million of working capital,
substantially all of which was cash, after reduction for the $7.9 million commitment to retire our preferred stock. We remain debt
free.
Randy Keys, President and CEO, said: "The decisions to redeem our preferred stock and increase the common stock dividend reflect
our consistent focus on delivering value to our common shareholders. Our balance sheet strength, with almost $20 million of net
cash, combined with the end of the capital spending on the NGL plant, the anticipated increase in field cash flow and the
outstanding performance of the Delhi field, gives us the confidence to increase the dividend at this time. The Board of Directors
plans to again review the dividend in 2017 based on results from the NGL plant start-up and the future outlook for crude oil
prices. We ended the past fiscal year with our best financial position since this industry downturn began two years ago, and our
financial position and outlook have only improved during the quarter."
Results for the Quarter Ended September 30, 2016
The Delhi field continued to perform very well during the quarter, with gross production up by over 400 BOEPD from the prior
quarter to 7,371 BOEPD. This production growth resulted from work to improve the performance of the CO2 flood through selective
conformance efforts and other relatively low cost production enhancement projects. This increasing production trend is a very
favorable indicator for the long-term reserve recovery from the Delhi field.
In the current quarter, we reported operating revenues of $7.6 million, based on an average realized oil price of $42.66 per
barrel, and generated $2.7 million in income from operations. In the prior quarter, we reported $1.0 million in income from
operations on revenues of $7.2 million, which was based on an average oil price of $42.87 per barrel. Production volumes increased
to 1,935 BOEPD from 1,856 BOEPD in the prior quarter and were substantially above the year-ago quarter rate of 1,745 BOEPD.
Quarterly net income to common shareholders was $0.6 million, or $0.02 per diluted share, which includes a nonrecurring, noncash
deemed dividend of $1.0 million related to the redemption of our preferred stock and $0.3 million of final dividends on the
preferred stock, or $0.04 per share in the aggregate. On a pro forma basis, assuming the redemption of the preferred stock had
occurred prior to the current quarter, our net income to common shareholders would have been $1.8 million, or $0.06 per share.
Production costs in the Delhi field increased 15.4% from $2.0 million in the prior quarter to $2.3 million in the current
quarter, primarily as a result of higher volumes of purchased CO2. Total CO2 injection volumes increased during the summer, with a
corresponding increase in purchased volumes. Our cost of purchased CO2 is tied directly to realized oil prices in the field, so our
cost per Mcf was largely unchanged from quarter to quarter.
Depletion, depreciation and amortization expense increased slightly to $1.3 million from $1.2 million in the prior quarter on
increased production and sales volumes. The DD&A rate per barrel did not change significantly for these periods.
Our general and administrative expenses were $1.2 million for the quarter, of which $0.3 million were stock-based compensation
expenses and approximately $0.9 million were cash costs. These amounts represent a substantial decrease over the prior quarter and
year-ago quarter, and are in line with our expectations for lower G&A costs after the litigation settlement and the separation
of our artificial lift technology operations in late 2015. The Company has always maintained a consistent focus on cost control,
but we have made significant cost reductions over the past three years as we have streamlined and focused the organization during
this downturn.
Delhi Capital Spending
Construction of the Delhi natural gas liquids ("NGLs") recovery plant was completed in late October, and startup testing is
scheduled to begin this month. We expect the NGL plant to deliver significant production growth from new NGL volumes in the field
shortly after the end of the year. In addition, with an expected improvement in efficiency of the CO2 flood from removal of methane
and NGLs from the CO2 recycle stream, we are also expecting an increase in yearly crude oil production. As of September 30, 2016,
we had incurred $23.9 million of costs on the NGL plant out of an original budget of approximately $25 million net to the Company.
The completed cost of the project is expected to be largely within the original budget.
In late September and October, we approved eleven small capital workover projects for continuing conformance operations in the
Delhi field, totaling approximately $3.8 million ($0.9 million net to us). There are three workover rigs operating in the field and
we expect all of these operations to be completed by the end of the year. These new projects result from the demonstrated benefits
from previous conformance efforts and the significant returns that have been realized from relatively modest capital investments in
the field. These conformance projects add production and cash flow in a very short time frame after investment.
Liquidity and Capital Resources
Our liquidity position remains excellent, with $19.6 million of net working capital (after accrual of $7.9 million for the
redemption of preferred stock), $10.0 million of undrawn liquidity under our reserve-based credit facility and the expectation of
significant free cash flow over the next twelve months. Our future cash flow is dependent on the prices we receive for our
production. Based on our solid financial position, we expect to continue our quarterly common stock cash dividend program for the
foreseeable future.
Southwest IDEAS Investor Conference
Evolution also announces that Randy Keys, President and CEO of Evolution, will present at the Southwest IDEAS Investor
Conference on Wednesday, November 16, 2016 at the InterContinental Hotel in Dallas, Texas. The Company's presentation is scheduled
to begin at 8:40 a.m. Central (9:40 a.m. Eastern).
The presentation will be webcast live and may be accessed at the conference website, www.threepartadvisors.com/southwest-ideas.
It will also be available on the Company's website, www.evolutionpetroleum.com.
Conference Call
As previously announced, Evolution Petroleum will host a conference call on Tuesday, November 8, 2016 at 11:00 a.m. Eastern
(10:00 a.m. Central) to discuss results. To access the call, please dial 1-855-327-6837 (US and Canada) or 1-631-891-4304
(International). To listen live or hear a rebroadcast, please go to http://www.EvolutionPetroleum.com. A replay will be available
two hours after the end of the conference call through November 15, 2016 by calling 1-844-512-2921 (US and Canada) or
1-412-317-6671 (International) and providing the replay pin number of 10001875.
About Evolution Petroleum
Evolution Petroleum Corporation develops petroleum reserves and shareholder value by applying conventional and specialized
technology to known oil and gas resources, onshore in the United States. Our principal asset is our interest in a CO2 enhanced oil
recovery project in Louisiana's Delhi Field. Additional information, including the Company's most recent 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 forward-looking statements contained in this press release regarding potential results and future plans and objectives of
the Company involve a wide range risks and uncertainties. Statements herein using words such as "believe," "expect," "plans" and
words of similar meaning are forward-looking statements. Although our expectations are based on engineering, geological, financial
and operating assumptions that we believe to be reasonable, many factors could cause actual results to differ materially from our
expectations and we can give no assurance that our goals will be achieved. These factors and others are detailed under the heading
"Risk Factors" and elsewhere in our periodic documents filed with the SEC. The Company undertakes no obligation to update any
forward-looking statement.
Company Contact:
Randy Keys, President & CEO (713) 935-0122 rkeys@evolutionpetroleum.com
Evolution Petroleum Corporation and Subsidiaries
Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended September 30, June 30, 2016 2015 2016 Revenues Crude
oil $ 7,593,855 $ 7,325,813 $ 7,233,190 Natural gas liquids 89 1,050 5,553 Natural gas (4 ) 704 1,691 Artificial lift technology
services - 51,839 - Total revenues 7,593,940 7,379,406 7,240,434 Operating costs Production costs 2,344,641 2,608,579 2,031,642
Cost of artificial lift technology services - 9,868 - Depreciation, depletion and amortization 1,273,439 1,218,273 1,206,476
Accretion of discount on asset retirement obligations 13,224 11,343 14,499 General and administrative expenses * 1,235,043
1,684,845 3,032,994 Total operating costs 4,866,347 5,532,908 6,285,611 Income from operations 2,727,593 1,846,498 954,823 Other
Gain on realized derivative instruments, net 90 866,427 (644,936 ) Gain (loss) on unrealized derivative instruments, net (14,132 )
1,071,962 4,427 Delhi field litigation settlement - - 28,096,500 Delhi field insurance recovery related to pre-reversion event -
1,074,957 - Interest and other income 12,745 5,812 2,695 Interest expense (20,345 ) (18,460 ) (19,781 ) Income before income taxes
2,705,951 4,847,196 28,393,728 Income tax provision 889,176 1,754,969 7,519,258 Net income attributable to the Company 1,816,775
3,092,227 20,874,470 Dividends on preferred stock 250,990 168,575 168,576 Deemed dividend on preferred shares called for redemption
1,002,440 - - Net income available to common stockholders $ 563,345 $ 2,923,652 $ 20,705,894 Earnings per common share Basic $ 0.02
$ 0.09 $ 0.63 Diluted $ 0.02 $ 0.09 $ 0.63 Weighted average number of common shares Basic 32,957,010 32,718,244 32,904,481 Diluted
33,007,599 32,774,176 32,964,109
* General and administrative expenses for the three months ended September 30, 2016, September 30, 2015 and June 30, 2016
included non-cash stock-based compensation expenses of $311,688, $218,115 and $1,041,463, respectively. These quarters also
respectively included $28,129, $306,357 and $646,931 of litigation expenses.
Evolution Petroleum Corporation and Subsidiaries
Consolidated Condensed Balance Sheets (Unaudited) September 30, 2016 June 30, 2016 Assets Current assets Cash and cash equivalents
$ 28,236,711 $ 34,077,060 Receivables 2,518,470 2,638,188 Deferred tax asset - 105,321 Derivative assets, net - 14,132 Prepaid
expenses and other current assets 273,114 251,749 Total current assets 31,028,295 37,086,450 Oil and natural gas property and
equipment, net (full-cost method of accounting) 61,451,021 59,970,463 Other property and equipment, net 50,585 28,649 Total
property and equipment 61,501,606 59,999,112 Other assets 348,014 365,489 Total assets $ 92,877,915 $ 97,451,051 Liabilities and
Stockholders' Equity Current liabilities Accounts payable $ 2,509,041 $ 5,809,107 Preferred shares called for redemption 7,932,975
- Accrued liabilities and other 839,313 2,097,951 State and federal income taxes payable 97,078 621,850 Total current liabilities
11,378,407 8,528,908 Long term liabilities Deferred income taxes 12,444,045 11,840,693 Asset retirement obligations 772,175 760,300
Total liabilities 24,594,627 21,129,901 Commitments and contingencies (Note 15) Stockholders' equity Preferred stock, par value
$0.001; 5,000,000 shares authorized:8.5% Series A Cumulative Preferred Stock, 1,000,000 shares designated, 317,319 shares issued
and outstanding at September 30, 2016 and June 30, 2016; with a liquidation preference of $7,932,975; called for redemption at
September 30, 2016 (Note 8) - 317 Common stock; par value $0.001; 100,000,000 shares authorized: issued and outstanding 33,045,515
shares and 32,907,863 as of September 30, 2016 and June 30, 2016, respectively 33,045 32,907 Additional paid-in capital 40,222,825
47,171,563 Retained earnings 28,027,418 29,116,363 Total stockholders' equity 68,283,288 76,321,150 Total liabilities and
stockholders' equity $ 92,877,915 $ 97,451,051 Evolution Petroleum Corporation and Subsidiaries Consolidated Condensed Statements
of Cash Flows (Unaudited) Three Months Ended September 30, 2016 2015 Cash flows from operating activities Net income attributable
to the Company $ 1,816,775 $ 3,092,227 Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 1,287,523 1,230,432 Stock-based compensation 311,688 218,115 Accretion of discount on
asset retirement obligations 13,224 11,343 Settlements of asset retirement obligations (15,899 ) - Deferred income taxes 708,673
(12,568 ) (Gain) loss on derivative instruments, net 14,042 (1,938,389 ) Write-off of deferred loan costs - 50,414 Changes in
operating assets and liabilities: Receivables 119,808 757,617 Prepaid expenses and other current assets (21,365 ) 47,815 Accounts
payable and accrued expenses (2,235,240 ) (1,563,847 ) Income taxes payable (524,772 ) 343,704 Net cash provided by operating
activities 1,474,457 2,236,863 Cash flows from investing activities Derivative settlement payments (paid) received (318,708 )
551,772 Capital expenditures for oil and natural gas properties (4,818,816 ) (6,571,757 ) Capital expenditures for other property
and equipment (26,347 ) - Other assets - (23,802 ) Net cash used in investing activities (5,163,871 (6,043,787 ) Cash flows from
financing activities Cash dividends to preferred stockholders (168,575 ) (168,575 ) Cash dividends to common stockholders
(1,652,290 ) (1,629,703 ) Common share repurchases, including shares surrendered for tax withholding (330,070 ) (1,175,920 ) Tax
benefits related to stock-based compensation - 2,980,832 Other - (1,276 ) Net cash (used) provided by financing activities
(2,150,935 ) 5,358 Net decrease in cash and cash equivalents (5,840,349 ) (3,801,566 ) Cash and cash equivalents, beginning of
period 34,077,060 20,118,757 Cash and cash equivalents, end of period $ 28,236,711 $ 16,317,191 Supplemental disclosures of cash
flow information: Three Months Ended September 30, 2016 2015 Income taxes paid $ 787,366 $ - Louisiana carryback income tax refund
and related interest received - 1,556,999 Non-cash transactions: Change in accounts payable used to acquire property and equipment
(2,030,485 ) (4,072,935 ) Accrued redemption of called preferred shares 7,932,975 - Accrued preferred dividends through redemption
date 82,415 - Deferred loan costs charged to oil and gas property costs - 108,472 Settlement of accrued treasury stock purchases -
(170,283 ) Supplemental Information on Oil and Natural Gas Operations (Unaudited)Three Months Ended September 30, 2016 2015
Variance Variance % Oil and gas production: Crude oil revenues $ 7,593,855 $ 7,325,813 $ 268,042 3.7 % NGL revenues 89 1,050 (961 )
n.m. Natural gas revenues (4 ) 704 (708 ) n.m. Total revenues $ 7,593,940 $ 7,327,567 $ 266,373 3.6 % Crude oil volumes (Bbl)
178,002 156,916 21,086 13.4 % NGL volumes (Bbl) 4 82 (78 ) n.m. Natural gas volumes (Mcf) 16 307 (291 ) n.m. Equivalent volumes
(BOE) 178,009 157,049 20,960 13.3 % Equivalent volumes per day (BOE/D) 1,935 1,745 190 10.9 % Crude oil price per Bbl $ 42.66 $
46.69 $ (4.03 ) (8.6 )% NGL price per Bbl 22.25 12.80 9.45 73.8 % Natural gas price per Mcf (0.25 ) 2.29 (2.54 ) n. m. Equivalent
price per BOE $ 42.66 $ 46.66 $ (4.00 ) (8.6 )% CO2 costs $ 1,078,133 $ 1,388,926 $ (310,793 ) (22.4 )% All other lease operating
expense 1,266,508 1,219,653 46,855 3.8 % Production costs $ 2,344,641 $ 2,608,579 $ (263,938 ) (10.1 )% Production costs per BOE $
13.17 $ 16.61 $ (3.44 ) (20.7 )% CO2 volumes mcf per day, gross 73,747 89,705 (15,958 ) (17.8 )% Oil and gas DD&A (a) $
1,265,637 $ 1,188,872 $ 76,765 6.5 % Oil and gas DD&A per BOE $ 7.11 $ 7.57 $ (0.46 ) (6.1 )% Artificial lift technology
services: Services revenues $ - $ 51,839 $ (51,839 ) n.m. Cost of service - 9,868 (9,868 ) n.m. Depreciation and amortization
expense $ - $ 25,384 $ (25,384 ) n.m. n.m. Not meaningful. (a) Excludes depreciation and amortization expense for artificial lift
technology services and $7,802 and $4,017 of other depreciation and amortization expense for the three months ended September 30,
2016 and 2015, respectively. Supplemental Information on Oil and Natural Gas Operations (Unaudited)Three Months Ended Sept. 30,
2016 June 30, 2016 Variance Variance % Oil and gas production: Crude oil revenues $ 7,593,855 $ 7,233,190 $ 360,665 5.0 % NGL
revenues 89 5,553 (5,464 ) n.m. Natural gas revenues (4 ) 1,691 (1,695 ) n.m. Total revenues $ 7,593,940 $ 7,240,434 $ 353,506 4.9
% Crude oil volumes (Bbl) 178,002 168,397 9,605 5.7 % NGL volumes (Bbl) 4 320 (316 ) n.m. Natural gas volumes (Mcf) 16 986 (970 )
n.m. Equivalent volumes (BOE) 178,009 168,881 9,128 5.4 % Equivalent volumes per day (BOE/D) 1,935 1,856 79 4.3 % Crude oil price
per Bbl $ 42.66 $ 42.95 $ (0.29 ) (0.7 )% NGL price per Bbl 22.25 17.35 4.90 n.m. Natural gas price per Mcf (0.25 ) 1.72 (1.97 )
n.m. Equivalent price per BOE $ 42.66 42.87 $ (0.21 ) (0.5 )% CO2 costs $ 1,078,133 $ 852,862 $ 225,271 26.4 % All other lease
operating expense 1,266,508 1,178,780 87,728 7.4 % Production costs $ 2,344,641 $ 2,031,642 $ 312,999 15.4 % Production costs per
BOE $ 13.17 $ 12.03 $ 1.14 9.5 % CO2 volumes mcf per day, gross 73,747 58,727 15,020 25.6 % Oil and gas DD&A (a) $ 1,265,637 $
1,200,737 $ 64,900 5.4 % Oil and gas DD&A per BOE $ 7.11 $ 7.11 $ - - % n.m. Not meaningful. (a) Excludes non-operating
depreciation and amortization of $7,802 and $5,739 for the three months ended September 30, 2016 and June 30, 2016, respectively.
SOURCE: Evolution Petroleum Corporation
