Evolution Petroleum Announces Pending Retirement of CFO, Election of New Officer and Amount of Previously Disclosed Restructuring Charges
HOUSTON, Jan. 6, 2014 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE MKT: EPM) today announced executive changes and additional information regarding its previously announced restructuring of operations.
Retirement of CFO
Vice President, Chief Financial Officer and Treasurer Sterling McDonald, who will turn 65 in 2014, has informed the Company of his intention to retire pending his replacement. Mr. McDonald has served as CFO and Treasurer since 2003 and was the second employee hired by the Company. As such, he played an instrumental part in the outstanding growth of the Company, overseeing the financial, accounting and administrative functions. Mr. McDonald also has been a key member of the executive team that created and executed the strategy that has developed tremendous shareholder wealth. Shareholders, the Board of Directors and staff have greatly benefited from Sterling's contributions and we wish him well in his retirement.
Mr. McDonald commented, "I am very fortunate to have worked with such a fine team in building a great company for our shareholders and creating value well in excess of our original expectations. I am confident that the management team and board of directors will continue Evolution's growth and success going forward."
Robert Herlin, Chairman and Chief Executive Officer said, "It has been my distinct pleasure to work with Sterling these last 10 years. His significant and substantial contributions have helped to position the Company for its next stage of development, and I personally thank him for his service and commitment. He will be missed, and we are fortunate to be able to count on him to facilitate the transition to his successor."
The Company has engaged a corporate recruiter to assist in identifying candidates to replace Mr. McDonald with an emphasis on oilfield services experience to help further commercialize its growing artificial lift technology business segment. Mr. McDonald will continue his present duties until his successor has been identified and elected by the Board of Directors to fill the roles of Chief Financial Officer and Principal Accounting Officer, which is expected to occur in January 2014. Mr. McDonald will be available to the Company as needed during its transition period.
Promotion of New Officer
In addition and as part of the recent restructuring of operations, the Board of Directors has elected David Joe, the current Controller and Corporate Secretary, to the additional positions of Vice President and Chief Administrative Officer. Mr. Joe joined the Company in 2005 and since then has been a key member of the management team.
The Company previously announced an operational restructuring in November 2013 that focuses on two core assets: the Delhi Field CO2 enhanced oil recovery project and the Company's patented GARP® artificial lift technology. As part of this effort, the Company completed the divestment of all of its remaining non-GARP® operated properties in December 2013. Accordingly, three members of the operations staff left the Company as of December 31, 2013. Under the severance policy adopted for the restructuring, the departing employees were provided severance in the amount of one year's cash compensation payable over twelve months and acceleration of unvested restricted stock awarded from 2010 through 2012. The same benefits are being provided to Mr. McDonald upon his retirement. These costs will be charged to the fiscal quarter ending December 31, 2013 and are estimated to be approximately $2.0 million pre-tax, of which $0.6 million will be noncash expense.
As previously disclosed, employees and directors exercised more than 4 million of 4.8 million performance stock options and warrants awarded from 2004 through 2008, creating approximately $31 million of tax deductions that permanently reduce current and future taxable income up to such amount (the "Deductions"). A portion of the Deductions is expected to apply to fiscal 2014 tax year ending June 30, 2014. In addition to the permanent tax savings, the Deductions may cause recent and near-term cash distributions to shareholders to be treated as return of capital.
On a financial reporting basis, the Deductions will be recorded as a reduction in current income taxes payable each year, offset by an increase in equity, in amounts equal to the cash taxes payable prior to the effect of the Deductions. The Deductions will only impact reported earnings by increasing the projected effective tax rate closer to the statutory rate in those years affected by the Deductions due to the percentage depletion deduction being delayed and carried forward.
The Company will also record a one-time pre-tax expense during the quarter ended December 31, 2013 of approximately $0.65 million associated with the derivatives' exercise due to incremental payroll tax associated with the derivative exercise and transaction expenses.
Assuming a 34% statutory federal income tax rate, the approximate $10.8 million of current and future tax payments savings from the derivatives' exercise and one-time charges, combined with a reduction in ongoing overhead due to the staff reductions, should substantially exceed the restructuring charges and the cost of expected staff growth associated with further commercialization of GARP®.
All of the staff and directors of Evolution wish our departing employees continued success.
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, 2013 include 13.8 MMBOE of proved, 11.2 MMBOE of probable reserves, 3.7 MMBOE of possible reserves, and no debt. Assets include a CO2-EOR project with growing production in Louisiana's Delhi Field and a patented artificial lift technology designed to extend the life and ultimate recoveries of wells with oil or associated water production. Other assets include royalty interests in almost 3,000 net acres in the Giddings Field and an interest in a joint venture in the Mississippian Lime play in Kay County, OK with substantial probable reserves. 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).
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.
Robert Herlin, CEO
SOURCE Evolution Petroleum Corporation