Evolution Petroleum Reports Fiscal Year 2012 Financial Results

HOUSTON, Sept. 13, 2012 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE MKT: EPM) today reported financial results for its fourth quarter and fiscal year-ended June 30, 2012 ("Q4-12" and "FY-12"). The Company earlier reported operating results for FY-12, year-end reserves and a capital plan for fiscal year 2013 on September 5, 2012.

Highlights include:

  • Net income of $4.5 million in fiscal 2012, up from a $0.2 million loss in fiscal 2011
  • Increased full-year production rate by 79% to 569 barrels of oil equivalent ("BOE") per day
  • Increased proved and probable PV-10* to $446 million and $174 million, respectively
  • Approved capital expenditure budget of $10 million for fiscal 2013 focused on the Mississippian Lime play
  • Reduced lease operating expense per unit by 25% to $8.21 per BOE in fiscal 2012

Robert Herlin, CEO, said "Fiscal 2012 was another transition year for Evolution Petroleum as we continued our rapid growth in production, revenues, earnings and value per share. We are pleased to report continued year over year improvements across the board, but particularly in earnings and cash flow. The temporary reduction in CO2 injection at Delhi Field in the latter portion of the fourth quarter did impact our sequential results, but we expect to resume production growth there as ambient temperatures decline prior to equipment changes that should prevent a repeat next summer.  Importantly, we added a major new growth asset to our portfolio in the Mississippian Lime oil play in Kay County, Oklahoma and have already begun drilling operations.

"With our Delhi payout balance rapidly diminishing, we are looking forward to realizing the substantial revenues associated with our reversionary 24% working interest that is additive to our existing royalties and expanding the redeployment of that cash flow into growth projects to increase long term value per share."

Financial Results for the Quarter Ended June 30, 2012

Revenues for Q4-12 decreased to $4.6 million compared to $4.8 million in Q3-12.  Quarterly net income to common shareholders decreased 28% sequentially to $0.9 million, or $0.03 per share diluted, compared to net income of $1.3 million, or $0.04 per share diluted, for Q3-12.  The decline in revenue was primarily due to temporary equipment issues at Delhi that should be remedied soon.  A sequential decline in lease operating expense largely offset the deferred Delhi revenue loss, and year-end accruals for higher incentive compensation and income tax true-ups generated most of the $0.37 million decline in sequential quarterly net income.  Compared to the year-ago quarter, current quarter net income increased 74% over Q4-11's net income of $0.5 million, or $0.02 per share diluted, on revenues of $3.2 million. Results for all periods included significant non-cash stock compensation expense. 

As previously reported, quarterly sales volumes for Q4-12 decreased 6% sequentially to 579 net BOE per day compared to 619 BOE per day for Q3-12 due primarily to temporarily reduced CO2 injections, turnaround of the Delhi processing plant and normal depletion at Giddings, partially offset by the addition of new production from GARP™ and Lopez Field operations in South Texas.  Compared to the year-ago quarter, sales volumes in Q4-12 increased 32% due primarily to increases at Delhi, full year contributions of wells drilled during FY-11 at Giddings and producing wells added during FY-12. Our blended product price in Q4-12 increased 1% sequentially over Q3-12 and 9% over the year-ago quarter to $86.91 per BOE due to the increased content of oil, which offset decreases in oil, NGL and natural gas prices.

Lease operating expense decreased 35% from the prior quarter to $0.4 million, or $8.16 per BOE compared to $11.76 per BOE in Q3-12. The decrease from Q3-12 was due primarily to reduced field costs in the Lopez field following extensive work in Q3-12 to improve water disposal methods. Total lease operating expense in Q4-12 was 24% higher than the year-ago quarter, due primarily to the addition of wells drilled or acquired during FY-12.

General and administrative ("G&A") expense in Q4-12 increased 8% over the prior quarter and 24% over the year-ago quarter to $1.7 million, due primarily to an accrual for higher than expected annual incentive payments to staff. Non-cash stock-based compensation of $0.35 million in Q4-12 (21% of total G&A expense) was flat compared to the prior quarter and down 11% from the year-ago quarter.

Financial Results for the Year Ended June 30, 2012

For fiscal year 2012, net income to common shareholders improved to $4.5 million, or $0.14 per share diluted, compared to a loss of $0.2 million, or $(0.01) per share, in FY-11. Revenues in FY-12 increased 139% to $18.0 million compared to $7.5 million in FY-11. The increase in revenues was due to a 79% increase in volumes to 569 BOE per day, compared to 319 BOE per day in FY-11, and a 33% increase in blended product price to $86.29 per BOE, compared to $64.68 per BOE in FY-11. The year over year increase in revenues and sales volumes were driven primarily by a 208% increase in Delhi volumes and a 12% increase in average realized crude oil price.

For the full year, lease operating expense increased 31% to $1.7 million from $1.3 million, but decreased 26% on a units-of-production basis to $8.21 per BOE from $11.15 per BOE in the prior year.  The absolute increase was due primarily to the addition of wells drilled in FY-11 and FY-12, the addition of wells acquired in our GARP® business and the extensive field work conducted in the Lopez Field to improve water disposal methods, while per unit declines were largely due to increased production. Depletion expense increased to $1.1 million, or $5.22 per BOE, compared to $0.5 million, or $4.55 per BOE, in FY-11. The increase in depletion was due to higher sales volumes and the inclusion of all remaining unevaluated leaseholds outside of our Mississippi Lime project and a small amount of additional future capital expenditures at Delhi resulting from acceleration of our reversion date. Depletion was partially offset by the nonrenewal of leases covering certain proved undeveloped drilling locations in the Giddings Field.

G&A expense for FY-12 increased 15% over FY-11 to $6.1 million due mostly to higher incentive payouts, legal expenses and board fees. Non-cash stock-based compensation for FY-12 totaled $1.5 million, or 24% of total G&A expense, compared to $1.5 million, or 29% of total G&A expense in FY-11.

Reserves as of June 30, 2012

As previously reported, and including related PV-10* estimates, our independent reservoir engineers assigned the following reserves as of June 30, 2012: 







Area

Oil

(MBbls)

Gas

(MMCF)

NGL

(MBbls)

Total

(MBoe)

PV-10*

($000) 







Proved Developed






Delhi

7,535

-

-

7,535

325,944

Giddings

122

1,499

112

484

9,560

Lopez

14

-

-

14

453

Subtotal

 

7,671

 

1,499

 

112

 

8,033

 

335,957

 

Proved Undeveloped






Delhi

3,477

-

-

3,477

83,174

Giddings

399

6,361

380

1,839

26,049

Lopez

92

-

-

92

335

Subtotal

 

3,968

 

6,361

 

380

 

5,408

 

109,558

 

Total Proved

 

11,639

 

7,860

 

492

 

13,441

 

445,515

 

Probable Developed






Delhi

 

2,653

 

-

 

-

 

2,653

 

58,236

 

Probable Undeveloped






Delhi

3,128

-

-

3,128

44,540

Mississippian Lime

3,652

16,620

-

6,422

69,017

Lopez

475

-

-

475

2,535

Subtotal

 

7,255

 

16,620

 

-

 

10,025

 

116,092

 

Total Probable

9,908

16,620

-

12,678

174,328







FY 2013 Capital Budget

The board of directors has approved a FY-13 capital budget of $10 million plus the remaining balance of the Mississippian Lime project purchase obligation. Of the total approved expenditures, about 80% is dedicated to our Mississippian Lime project. Working capital on hand is sufficient to meet this base level of activity, and expanded investments  will be funded from projected cash flows from operations, supplemented as needed from divestments of noncore assets, joint ventures and our credit line.   

Conference Call

Evolution Petroleum will host a conference call on Thursday, September 13 at 11:00 a.m. Eastern Time (10:00 a.m. Central) to discuss these results. To access the call, please dial 1-800-860-2442 (U.S.), 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 the investor relations section of Evolution's corporate website, 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.  Producing assets include a CO2-EOR project with growing production in Louisiana's Delhi Field, and producing wells and proved 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 with 114 gross (25 net to EPM) probable drilling locations 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



 

Company Contact:

Sterling McDonald, VP & CFO

(713) 935-0122

smcdonald@evolutionpetroleum.com

- Financial Tables to Follow -

 

Evolution Petroleum Corporation and Subsidiaries

Consolidated Statements of Operations

(unaudited)

 



Three Months Ended


Year Ended



June 30,


June 30,



2012


2011


2012


2011

Revenues









Crude oil

$       4,334,677


$     2,638,138


$    16,547,415


$     5,672,471


Natural gas liquids

120,442


224,062


620,187


893,525


Natural gas

126,827


303,072


794,436


964,879


Total revenues

4,581,946


3,165,272


17,962,038


7,530,875










Operating Costs









Lease operating expense

430,387


348,268


1,708,235


1,298,650


Production taxes

18,839


26,593


66,764


80,677


Depreciation, depletion and amortization

302,623


204,141


1,136,974


563,104


Accretion of asset retirement obligations

20,793


16,599


77,505


59,913


General and administrative *

1,689,195


1,359,269


6,143,286


5,335,384


Total operating costs

2,461,837


1,954,870


9,132,764


7,337,728










Income (loss) from operations

2,120,109


1,210,402


8,829,274


193,147










Other income









Interest income (expense) – net

(10,808)


1,180


3,778


14,214









Net income before income tax provision

2,109,301


1,211,582


8,833,052


207,361









Income tax provision

1,014,144


676,692


3,700,922


448,914









Net income (loss)  attributable to the Company

$     1,095,157


$       534,890


$      5,132,130


$     (241,553)









Dividends on Preferred Stock

168,576


---


630,391


---









Net income (loss) attributable to common shareholders

$         926,581


$       534,890


$     4,501,739


$     (241,553)









Earnings (loss) per common share









Basic

$              0.03


$             0.02


$              0.16


$           (0.01)


Diluted

$              0.03


$             0.02


$              0.14


$           (0.01)










Weighted average number of common shares









Basic

27,858,815


27,612,916


27,784,298


27,437,496


Diluted

31,766,049


31,090,818


31,609,929


27,437,496










*includes non-cash stock compensation expense of $349,960 and $392,593 for Q4-12 and Q4-11, respectively, and $1,475,995 and $1,536,007 for the corresponding fiscal years 2012 and 2011.



 

 

Evolution Petroleum Corporation and Subsidiaries

Consolidated Balance Sheets

(unaudited)

 



June 30,


June 30,




2012


2011


Assets






Current assets






Cash and cash equivalents


$

14,428,548


$

4,247,438


Certificates of deposit


250,000


250,000


Restricted cash from joint interest partner


--


118,194


Receivables






Oil and natural gas sales


1,343,347


1,559,404


Joint interest partner


96,151


86,105


Income taxes


92,885


28,680


Other


190


167


Deferred tax asset


325,235


--


Prepaid expenses and other current assets


233,433


67,852


Total current assets


16,769,789


6,357,840








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






Oil and natural gas properties — full-cost method of accounting, of which $6,042,094 and $2,940,199 at June 30, 2012 and 2011, respectively, were excluded from amortization


40,476,172


33,447,564


Other property and equipment


92,271


69,262


Total property and equipment


40,568,443


33,516,826








Advances to joint interest operating partner


1,366,921


--


Other assets


250,333


77,287








Total assets


$

58,955,486


$

39,951,953








Liabilities and Stockholders' Equity






Current liabilities






Accounts payable


$

407,570


$

514,177


Due to joint interest partner


3,217,975


105,567


Accrued payroll


1,005,624


682,850


Royalties payable


294,013


742,651


State and federal taxes payable


91,967


82,122


Other current liabilities


71,768


84,565


Total current liabilities


5,088,917


2,211,932








Long term liabilities






Deferred income taxes


6,205,093


3,330,266


Asset retirement obligations


968,677


859,586


Deferred rent


70,011


85,412








Total liabilities


12,332,698


6,487,196








Commitments and contingencies (Note 14)












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 June 30, 2012, with a total liquidation preference of $7,932,975 ($25.00 per share)


317



Common stock; par value $0.001; 100,000,000 shares authorized; issued 28,670,424 shares; outstanding 27,882,224 shares and 27,612,916 shares as of June 30, 2012 and 2011, respectively


28,670


28,400


Additional paid-in capital


29,416,914


20,761,209


Retained earnings


18,058,909


13,557,170




47,504,810


34,346,779


Treasury stock, at cost, 788,200 shares as of June 30, 2012 and June 30, 2011


(882,022)


(882,022)








Total stockholders' equity


46,622,788


33,464,757








Total liabilities and stockholders' equity


$

58,955,486


$

39,951,953


 

Evolution Petroleum Corporation and Subsidiaries

Consolidated Statements of Cash Flow

(unaudited)

 



Years Ended June 30,




2012


2011



Cash Flows From Operating Activities







Net income (loss) attributable to the Company


$

5,132,130


$

(241,553)



Adjustments to reconcile net income (loss) to net cash provided by operating activities:







Depreciation, depletion and amortization


1,150,454


563,104



Stock-based compensation


1,475,995


1,536,007



Accretion of asset retirement obligations


77,505


59,913



Settlement of asset retirement obligations


(61,936)


(1,847)



Deferred income taxes


2,549,591


380,386



Deferred rent


(15,401)


3,777



Other


--


32,080



Changes in operating assets and liabilities:







Receivables from oil and natural gas sales


216,057


(1,023,038)



Receivables from income taxes and other


(64,194)


687,228



Due to/from joint interest partners


139,705


(87,743)



Prepaid expenses and other current assets


(165,581)


90,652



Accounts payable and accrued expenses


379,874


497,783



Royalties payable


(448,638)


521,589



Income taxes payable


9,845


36,778



Net cash provided by operating activities


10,375,406


3,055,116










Cash Flows from Investing Activities







Proceeds from asset sales


799,610


231,326



Development of oil and natural gas properties


(3,291,921)


(2,509,652)



Acquisitions of oil and natural gas properties


(3,768,162)


(997,279)



Capital expenditures for other equipment


(61,176)


(864)



Advances to joint venture operating partner


(224,206)


--



Maturities of certificates of deposit


--


1,100,000



Purchases of certificates of deposit


--




Other assets


(35,056)


(48,702)



Net cash used in investing activities


(6,580,911)


(2,225,171)










Cash Flows from Financing Activities







Proceeds from issuance of preferred stock


6,930,535


--



Proceeds from issuance of restricted stock


--


28



Proceeds from the exercise of stock options


--


106,049



Preferred stock dividends paid


(630,391)


--



Deferred loan costs


(163,257)


--



Windfall tax benefit


249,728


173,157



Net cash provided by financing activities


6,386,615


279,234










Net increase (decrease) in cash and cash equivalents


10,181,110


1,109,179










Cash and cash equivalents, beginning of period


4,247,438


3,138,259










Cash and cash equivalents, end of period


$

14,428,548


$

4,247,438













The following table sets forth certain financial information with respect to our oil and natural gas operations:



Year Ended








June 30




%




2012


2011


Variance


change












Sales Volumes, net to the Company:




















Delhi – crude oil Royalty (Bbl)


136,074


44,141


91,933


208

%











Other properties










Crude oil (Bbl)


15,006


13,824


1,182


9

%











NGLs (Bbl)


12,611


18,704


(6,093)


(33)

%











Natural gas (Mcf)


266,787


238,608


28,179


12

%

Crude oil, NGLs and natural gas (BOE)


208,156


116,437


91,719


79

%











Revenue data:




















Delhi – crude oil


$

15,143,770


$

4,493,240


$

10,650,530


237

%











Other properties










Crude oil


1,403,645


1,179,231


224,414


19

%











NGLs


620,187


893,525


(273,338)


(31)

%











Natural gas


794,436


964,879


(170,443)


(18)

%

Total revenues


17,962,038


7,530,875


$

10,431,163


139

%











Average price:










Delhi – crude oil


$

111.29


$

101.79


$

9.50


9

%

Other properties










Crude oil (per Bbl)


93.54


85.30


8.24


10

%

NGLs (per Bbl)


49.18


47.77


1.41


3

%

Natural gas (per Mcf)


2.98


4.04


(1.06)


(26)

%

Crude oil, NGLs and natural gas (per BOE)


$

86.29


$

64.68


$

21.61


33

%











Expenses (per BOE)










Lease operating expenses and production taxes


$

8.53


$

11.85


$

(3.32)


(28)

%

Depletion expense on oil and natural gas properties (a)


$

5.22


$

4.55


$

0.67


15

%

















(a)

Excludes depreciation of office equipment, furniture and fixtures, and other asset amortization totaling $38,167 and $33,600, for the year ended June 30, 2012 and 2011, respectively. For the 2012 period only, other asset amortization of $11,787 is also excluded.

        

SOURCE Evolution Petroleum Corporation



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