HOUSTON, TX / ACCESSWIRE / February 7, 2017 / Evolution Petroleum Corporation (NYSE MKT: EPM) today announced that its Board of
Directors increased the quarterly cash dividend to common shareholders to $0.07 per share, an increase of 8% over the previous rate
of $0.065 per share. The quarterly dividend, which amounts to $0.28 per share on an annual basis, will be paid on March 31, 2017 to
shareholders of record on March 15, 2017.
Evolution also reported financial and operating highlights for its fiscal second quarter ended December 31, 2016, with
comparisons to the fiscal first quarter ended September 30, 2016 (the "prior quarter") and the quarter ended December 31, 2015 (the
"year-ago quarter").
Highlights for the Quarter:
- We reported net income of $2.3 million in the current quarter, or $0.07 per common share. - We
paid our thirteenth consecutive quarterly cash dividend on common shares of $0.065 per share, which reflected a 30% increase over
the prior quarter. We set the March 2017 dividend at $0.07 per share, a further increase of 8%. - Gross production in the Delhi
field increased 2.8% over the prior quarter, to 7,580 barrels of oil per day ("BOPD") from 7,371 BOPD, primarily from continuing
conformance and production enhancement operations. This production consisted entirely of crude oil as first sales of NGL's occurred
after the end of the quarter. - Our net production increased to 1,987 BOPD, from 1,935 BOPD in the prior quarter. Our average
realized price per barrel was $46.66, up almost 10% from the $42.66 average price in the prior quarter. - The Delhi natural gas
liquid ("NGL") plant was completed during the quarter and commenced production at the end of December. - We completed the
redemption of our 8.5% Series A Cumulative Preferred Stock at a total cost of $7.9 million, funded by working capital. This will
increase cash available to common stockholders by $674,302 per year, or $0.02 per common share. - We ended the quarter with $18.6
million of working capital, substantially all of which was cash. - We remain debt free.
Randy Keys, President and CEO, said: "The Delhi field turned in another solid performance this quarter. Gross production
increased by over 200 BOPD from the prior quarter. We continue to see the benefits from diverse conformance workovers and
performance enhancement projects designed to improve efficiency in use of the recycle CO2 stream. The combined results have been
stellar, as gross production has increased from below 6,000 BOPD to over 7,500 BOPD in the span of less than two years. Further,
these results have been achieved while reducing purchased CO2 volumes. We began selling NGL's from the NGL recovery plant after the
end of the quarter, so this quarter's production consists entirely of light Louisiana Sweet ("LLS") crude oil from the field. This
continuing positive performance of the Delhi field bodes well for our long-term recovery of reserves from the field.
"With the redemption of our preferred stock, which frees up additional cash of $0.02 per common share annually, and the end of
our capital spending obligations on the NGL plant, we decided to make a further increase in the common stock dividend to $0.07 per
share. The Board of Directors intends to revisit the dividend rate during 2017 based on results from the Delhi field, the timing of
further expansion of Delhi development and the outlook for crude oil prices."
Results for the Quarter Ended December 31, 2016
In the current quarter, we reported operating revenues of $8.5 million, based on an average realized oil price of $46.66 per
barrel, and generated $3.7 million in income from operations. In the prior quarter, we reported $2.7 million in income from
operations on revenues of $7.6 million, which was based on an average oil price of $42.66 per barrel. Net production volumes were
1,987 BOPD, an increase from 1,935 BOPD in the prior quarter and were substantially above the year-ago quarter rate of 1,803 BOPD.
Net income for the quarter was $2.3 million, or $0.07 per diluted share.
Production costs in the Delhi field were $2.3 million in the current quarter, which was unchanged from the prior quarter despite
a slightly higher cost per MCF of CO2, and up slightly from $2.2 million a year ago. Purchased CO2 volumes were 67.0 million cubic
feet (MMcf) per day, down 9% from 73.7 MMcf in the prior quarter. However, lower purchased CO2 volumes were offset by the increase
in the cost per Mcf, which is tied directly to higher realized oil prices in the field.
Our general and administrative ("G&A") expenses were $1.2 million for the quarter, of which $0.3 million were noncash,
stock-based compensation expense and approximately $0.9 million were cash costs. These amounts were consistent with the prior
quarter and represent a 40% reduction from the year-ago quarter, which included significant litigation costs and was prior to the
separation of our artificial lift technology operations in the December 2015. We continue to focus on controlling our costs and are
seeing the benefits of these efforts in lower G&A costs.
Delhi Operations and Capital Spending
Construction of the Delhi NGL plant was completed in late October, and startup testing and commissioning followed in November
and December. The NGL plant commenced production at the end of December and first sales of products occurred in mid-January.
Production has been ramping up during an optimization period this month and full daily throughput is expected to be reached during
the coming quarter. Our costs incurred on the NGL plant through December 31, 2016 totaled $26.0 million, which we believe
represents substantially all of the capital costs to be incurred. The cost of the plant was within 7% of budget and differed
primarily as a result of price increases on specialized components after the original estimate, and additional commissioning
costs.
During the quarter, we completed several capital workover projects for continuing conformance operations in the Delhi field,
totaling approximately $1.6 million net to Evolution. 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. We
have seen significant production increases from conformance projects over the past two years.
Our current expectations for capital spending during the remainder of our fiscal year ended June 30, 2017 include a few
additional conformance and workover operations totaling less than $1 million net to Evolution. Based on recent meetings with the
field operator, we have identified new opportunities to invest in the Delhi field during the second half of this calendar year,
which is part of our fiscal 2018. The majority of this capital is planned for an infill drilling program to enhance production in
the current developed area of the flood. This program will consist of up to five new CO2 injection wells and seven new production
wells and will target productive oil zones which are not being swept effectively by the current CO2 flood. This infill program is
expected to both add production and increase ultimate recoveries above the current proved oil reserves. There are other capital
projects proposed to add infrastructure for the Phase Five expansion of the Delhi field so that it can be developed in a safe and
responsible manner. We currently expect this expansion to occur during calendar 2018.
Liquidity and Capital Resources
Our liquidity position remains excellent, with $18.6 million of net working capital (after payment of $7.9 million for the
redemption of preferred stock), $10 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.
Conference Call
For this quarter, Evolution has pre-recorded its quarterly conference call as a webcast audio commentary with associated slides.
This pre-recorded commentary will be available on the Company's website, www.EvolutionPetroleum.com, as soon as practicable after
the distribution of this quarterly earnings press release. This commentary, which is approximately 12 minutes in length, will be
re-broadcast on Wednesday, February 8, 2017 at 11:00 a.m. Eastern Time (10:00 a.m. Central). The re-broadcast will be followed by a
live question and answer session at 11:15 a.m. Eastern Time (10:30 a.m. Central). The quarterly review commentary and the question
and answer session will include forward looking information. To access the conference call by phone, please dial 1-855-327-6837 (US
and Canada) or 1-631-891-4304 (International). To listen live via webcast or to hear a rebroadcast, please go to
www.EvolutionPetroleum.com. A replay will be available two hours after the end of the conference call through February 15, 2017 by
calling 1-844-512-2921 (US and Canada) or 1-412-317-6671 (International) and providing the replay pin number of 10002342.
About Evolution Petroleum
Evolution Petroleum Corporation develops and produces petroleum reserves within known oil and gas reservoirs in the U.S., with a
focus on maximizing value per share. 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 Six Months Ended December 31, December 31, September
30, 2016 2015 2016 2016 2015 Revenues Crude oil $ 8,529,817 $ 6,565,804 $ 7,593,855 $ 16,123,672 $ 13,891,617 Natural gas liquids -
685 89 89 1,735 Natural gas - 317 (4 ) (4 ) 1,021 Artificial lift technology services - 56,121 - - 107,960 Total revenues 8,529,817
6,622,927 7,593,940 16,123,757 14,002,333 Operating costs Production costs 2,292,421 2,229,741 2,344,641 4,637,062 4,838,320 Cost
of artificial lift technology services - 50,131 - - 59,999 Depreciation, depletion and amortization 1,307,510 1,471,571 1,273,439
2,580,949 2,689,844 Accretion of discount on asset retirement obligations 13,106 11,517 13,224 26,330 22,860 General and
administrative expenses * 1,241,399 2,057,521 1,235,043 2,476,442 3,742,366 Restructuring charges ** - 1,257,433 - - 1,257,433
Total operating costs 4,854,436 7,077,914 4,866,347 9,720,783 12,610,822 Income (loss) from operations 3,675,381 (454,987 )
2,727,593 6,402,974 1,391,511 Other Gain on realized derivative instruments, net - 1,298,201 90 90 2,164,628 Gain (loss) on
unrealized derivative instruments, net - 361,761 (14,132 ) (14,132 ) 1,433,723 Delhi field insurance recovery related to
pre-reversion event - - - - 1,074,957 Interest and other income 14,061 5,853 12,745 26,806 11,665 Interest expense (20,711 )
(18,666 ) (20,345 ) (41,056 ) (37,126 ) Income before income taxes 3,668,731 1,192,162 2,705,951 6,374,682 6,039,358 Income tax
provision 1,361,097 368,889 889,176 2,250,273 2,123,858 Net income attributable to the Company 2,307,634 823,273 1,816,775
4,124,409 3,915,500 Dividends on preferred stock - 168,576 250,990 250,990 337,151 Deemed dividend on preferred shares called for
redemption - - 1,002,440 1,002,440 - Net income available to common stockholders $ 2,307,634 $ 654,697 $ 563,345 $ 2,870,979 $
3,578,349 Earnings per common share Basic $ 0.07 $ 0.02 $ 0.02 $ 0.09 $ 0.11 Diluted $ 0.07 $ 0.02 $ 0.02 $ 0.09 $ 0.11 Weighted
average number of common shares Basic 33,047,166 32,741,166 32,957,010 33,002,088 32,729,705 Diluted 33,083,027 32,802,440
33,007,599 33,037,269 32,789,461
* General and administrative expenses for the three months ended December 31, 2016, 2015 and September 30, 2016 included
non-cash stock-based compensation expense of $275,184, $212,724 and $311,688, respectively. For the six months ended December 31,
2016 and 2015, non-cash stock compensation expense was $586,872 and $430,839, respectively.
** Restructuring charges include $59,339 of non-cash stock compensation expense for the three and six months ended December 31,
2015.
Evolution Petroleum Corporation and Subsidiaries Consolidated Condensed Balance Sheets (Unaudited)December 31, 2016 June
30, 2016 Assets Current assets Cash and cash equivalents $ 19,156,377 $ 34,077,060 Receivables 3,101,169 2,638,188 Deferred tax
asset - 105,321 Derivative assets, net - 14,132 Prepaid expenses and other current assets 618,788 251,749 Total current assets
22,876,334 37,086,450 Oil and natural gas property and equipment, net (full-cost method of accounting) 63,832,372 59,970,463 Other
property and equipment, net 48,096 28,649 Total property and equipment 63,880,468 59,999,112 Other assets 330,300 365,489 Total
assets $ 87,087,102 $ 97,451,051 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 3,259,711 $ 5,809,107
Accrued liabilities and other 701,031 2,097,951 State and federal income taxes payable 310,544 621,850 Total current liabilities
4,271,286 8,528,908 Long term liabilities Deferred income taxes 13,444,891 11,840,693 Asset retirement obligations 784,247 760,300
Total liabilities 18,500,424 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;
no shares outstanding at December 31, 2016 as all shares were redeemed November 14, 2016 (Note 8); and 317,319 shares outstanding
at June 30, 2016 with a liquidation preference of $7,932,975 ($25.00 per share) - 317 Common stock; par value $0.001; 100,000,000
shares authorized: issued and outstanding 33,062,297 shares and 32,907,863 as of December 31, 2016 and June 30, 2016, respectively
33,062 32,907 Additional paid-in capital 40,368,236 47,171,563 Retained earnings 28,185,380 29,116,363 Total stockholders' equity
68,586,678 76,321,150 Total liabilities and stockholders' equity $ 87,087,102 $ 97,451,051 Evolution Petroleum Corporation and
Subsidiaries Consolidated Condensed Statements of Cash Flows (Unaudited)Six Months Ended December 31, 2016 2015 Cash flows from
operating activities Net income attributable to the Company $ 4,124,409 $ 3,915,500 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation, depletion and amortization 2,609,356 2,714,162 Impairments included in
restructuring charge - 569,228 Stock-based compensation 586,872 490,178 Accretion of discount on asset retirement obligations
26,330 22,860 Settlements of asset retirement obligations (121,391 ) - Deferred income taxes 1,709,519 (547,579 ) (Gain) loss on
derivative instruments, net 14,042 (3,598,351 ) Write-off of deferred loan costs - 50,414 Changes in operating assets and
liabilities: Receivables (462,981 ) 1,167,391 Prepaid expenses and other current assets (367,039 ) (119,515 ) Accounts payable and
accrued expenses (1,955,546 ) (310,054 ) Income taxes payable (311,306 ) 152,898 Net cash provided by operating activities
5,852,265 4,507,132 Cash flows from investing activities Derivative settlement payments (paid) received (318,618 ) 1,561,979
Capital expenditures for oil and natural gas properties (7,978,130 ) (8,650,217 ) Capital expenditures for other property and
equipment (30,447 ) - Other assets - (161,345 ) Net cash used in investing activities (8,327,195 ) (7,249,583 ) Cash flows from
financing activities Cash dividends to preferred stockholders (250,990 ) (337,151 ) Cash dividends to common stockholders
(3,801,962 ) (3,268,319 ) Common share repurchases, including shares surrendered for tax withholding (459,858 ) (1,354,743 ) Tax
benefits related to stock-based compensation - 3,910,163 Redemption of preferred shares (7,932,975 ) - Other 32 (1,243 ) Net cash
(used in) provided by financing activities (12,445,753 ) (1,051,293 ) Net decrease in cash and cash equivalents (14,920,683 )
(3,793,744 ) Cash and cash equivalents, beginning of period 34,077,060 20,118,757 Cash and cash equivalents, end of period $
19,156,377 $ 16,325,013 Supplemental disclosures of cash flow information: Six Months Ended December 31, 2016 2015 Income taxes
paid $ 1,278,773 $ 440,000 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 (1,516,932 ) (2,442,183 ) Deferred loan costs charged to oil and
gas property costs - 108,472 Settlement of accrued treasury stock purchases - (170,283 ) Royalty rights acquired through
non-monetary exchange of patent and trademark assets 108,512 Supplemental Information on Oil and Natural Gas Operations
(Unaudited)Three Months Ended Dec. 31, 2016 Sept. 30, 2016 Variance Variance % Oil and gas production: Crude oil revenues $
8,529,817 $ 7,593,855 $ 935,962 12.3 % NGL revenues - 89 (89 ) n.m. Natural gas revenues - (4 ) 4 n.m. Total revenues $ 8,529,817 $
7,593,940 $ 935,877 12.3 % Crude oil volumes (Bbl) 182,815 178,002 4,813 2.7 % NGL volumes (Bbl) - 4 (4 ) n.m. Natural gas volumes
(Mcf) - 16 (16 ) n.m. Equivalent volumes (BOE) 182,815 178,009 4,806 2.7 % Equivalent volumes per day (BOE/D) 1,987 1,935 52 2.7 %
Crude oil price per Bbl $ 46.66 $ 42.66 $ 4.00 9.4 % NGL price per Bbl - 22.25 (22.25 ) n.m. Natural gas price per Mcf - (0.25 )
0.25 n.m. Equivalent price per BOE $ 46.66 $ 42.66 $ 4.00 9.4 % CO2 costs $ 1,041,741 $ 1,078,133 $ (36,392 ) (3.4 )% All other
lease operating expense 1,250,680 1,266,508 (15,828 ) (1.2 )% Production costs $ 2,292,421 $ 2,344,641 $ (52,220 ) (2.2 )%
Production costs per BOE $ 12.54 $ 13.17 $ (0.63 ) (4.8 )% CO2 volumes (Mcf per day, gross) 66,961 73,747 (6,786 ) (9.2 )% Oil and
gas DD&A (a) $ 1,299,813 $ 1,265,637 $ 34,176 2.7 % Oil and gas DD&A per BOE $ 7.11 $ 7.11 $ - - %
n.m. Not meaningful.
(a) Excludes non-operating depreciation and amortization of $7,697 and $7,802 for the three months ended December 31 and
September 30, 2016, respectively.
Supplemental Information on Oil and Natural Gas Operations (Unaudited)Three Months Ended
December 31, 2016 2015 Variance Variance % Oil and gas production: Crude oil revenues $ 8,529,817 $ 6,565,804 $ 1,964,013 29.9 %
NGL revenues - 685 (685 ) n.m. Natural gas revenues - 317 (317 ) n.m. Total revenues $ 8,529,817 $ 6,566,806 $ 1,963,011 29.9 %
Crude oil volumes (Bbl) 182,815 165,847 16,968 10.2 % NGL volumes (Bbl) - 42 (42 ) n.m. Natural gas volumes (Mcf) - 182 (182 ) n.m.
Equivalent volumes (BOE) 182,815 165,919 16,896 10.2 % Equivalent volumes per day (BOE/D) 1,987 1,803 184 10.2 % Crude oil price
per Bbl $ 46.66 $ 39.59 $ 7.07 17.9 % NGL price per Bbl - 16.31 (16.31 ) n.m. Natural gas price per Mcf - 1.74 (1.74 ) n.m.
Equivalent price per BOE $ 46.66 $ 39.58 $ 7.08 17.9 % CO2 costs $ 1,041,741 $ 1,017,664 $ 24,077 2.4 % All other lease operating
expense 1,250,680 1,212,077 38,603 3.2 % Production costs $ 2,292,421 $ 2,229,741 $ 62,680 2.8 % Production costs per BOE $ 12.54 $
13.44 $ (0.90 ) (6.7 )% CO2 volumes (Mcf per day, gross) 66,961 73,312 (6,351 ) (8.7 )% Oil and gas DD&A (a) $ 1,299,813 $
1,254,350 $ 45,463 3.6 % Oil and gas DD&A per BOE $ 7.11 $ 7.56 $ (0.45 ) (6.0 )% Artificial lift technology services: Services
revenues $ - $ 56,121 $ (56,121 ) n.m. Cost of service - 50,131 (50,131 ) n.m. Depreciation and amortization expense $ - $ 213,091
$ (213,091 ) n.m.
n.m. Not meaningful.
(a) Excludes depreciation and amortization expense for artificial lift technology services and $7,697 and $4,130 of other
depreciation and amortization expense for the three months ended December 31, 2016 and 2015, respectively.
Supplemental
Information on Oil and Natural Gas Operations (Unaudited)Six Months Ended December 31, 2016 2015 Variance Variance % Oil and gas
production: Crude oil revenues $ 16,123,672 $ 13,891,617 $ 2,232,055 16.1 % NGL revenues 89 1,735 (1,646 ) n.m. Natural gas
revenues (4 ) 1,021 (1,025 ) n.m. Total revenues $ 16,123,757 $ 13,894,373 $ 2,229,384 16.0 % Crude oil volumes (Bbl) 360,817
322,763 38,054 11.8 % NGL volumes (Bbl) 4 124 (120 ) n.m. Natural gas volumes (Mcf) 16 489 (473 ) n.m. Equivalent volumes (BOE)
360,824 322,968 37,856 11.7 % Equivalent volumes per day (BOE/D) 1,961 1,755 206 11.7 % Crude oil price per Bbl $ 44.69 $ 43.04 $
1.65 3.8 % NGL price per Bbl 22.25 13.99 8.26 59.0 % Natural gas price per Mcf (0.25 ) 2.09 (2.34 ) n.m. Equivalent price per BOE $
44.69 $ 43.02 $ 1.67 3.9 % CO2 costs $ 2,119,874 $ 2,406,591 $ (286,717 ) (11.9 )% All other lease operating expense 2,517,188
2,431,729 85,459 3.5 % Production costs $ 4,637,062 $ 4,838,320 $ (201,258 ) (4.2 )% Production costs per BOE $ 12.85 $ 14.98 $
(2.13 ) (14.2 )% CO2 volumes (Mcf per day, gross) 66,961 73,312 (6,351 ) (8.7 )% Oil and gas DD&A (a) $ 2,565,450 $ 2,443,222 $
122,228 5.0 % Oil and gas DD&A per BOE $ 7.11 $ 7.56 $ (0.45 ) (6.0 )% Artificial lift technology services: Services revenues $
- $ 107,960 $ (107,960 ) n.m. Cost of service - 59,999 (59,999 ) n.m. Depreciation and amortization expense $ - $ 238,475 $
(238,475 ) n.m.
n.m. Not meaningful.
(a) Excludes depreciation and amortization expense for artificial lift technology services and $15,499 and $8,147 of other
depreciation and amortization expense for the six months ended December 31, 2016 and 2015, respectively.
SOURCE: Evolution Petroleum Corporation
