2014

Evolution Petroleum Reports Reserves as of June 30, 2013 and Declares Monthly Cash Dividends on 8.5% Series A Preferred Stock

HOUSTON, Sept. 4, 2013 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE MKT: EPM) today declared a monthly cash preferred stock dividend and reported year-end reserves as of June 30, 2013, with comparisons to reserves as of June 30, 2012 (the "prior year").

September Preferred Dividend
The Company declared today a monthly cash dividend on its perpetual non-convertible 8.5% Series A Cumulative Preferred Stock. The dividend is for the month of September 2013 and is payable on September 30, 2013 to holders of record at the close of business on September 16, 2013.  The payment will be 1/12th of the 8.5% annualized amount, or approximately $0.177083 per share, based on the $25.00 per share liquidation preference.

The Series A Preferred Stock is listed on the NYSE MKT under the ticker symbol "EPM.PRA."

Reserves as of June 30, 2013
Proved Reserves:

  • Total Proved Reserves of 13.8 million barrels of oil equivalent ("MMBOE"), up 2.4% from prior year, including a 23% increase at Delhi
  • Proved Developed Reserves of 10.1 MMBOE, up 26% from prior year
  • Total Proved Reserves are 93% oil, up from prior year's 87%
  • PV-10* increased 3% to $459 million (a non-GAAP measure reconciled below), including an 11% increase at Delhi

Probable Reserves:

  • Total Probable Reserves of 11.2 MMBOE, a decrease of 11%, including a 28% increase at Delhi
  • Probable Developed Reserves increased 34% to 3.6 MMBOE and are 100% oil
  • PV-10 of $135 million

Possible Reserves:

  • Possible Reserves, a new category, total 3.7 MMBOE and are solely in Delhi Field
  • Possible Developed Reserves total 2.7 MMBOE and are 100% oil
  • PV-10 of $32 million

The PV-10* of our Proved Reserves increased 3.1% to $459 million due to additions, upgrades and revisions in the Delhi and Lopez Fields, partially offset by lower commodity prices, normal production and divestment of 2.3 MMBOE of mostly undeveloped gassy proved reserves in the Giddings Field. Proved Reserves are essentially 100% liquids, being 93% crude oil and 7% natural gas liquids ("NGL").

Proved Developed Reserves increased 26% over the prior year to 10.1 MMBOE, or 73% of total proved reserves, with a PV-10 of $382 million. The increase is due to capital investments in the Delhi Field by the operator. Crude oil represents 100% of the total.

Probable Reserves totaled 11.2 MMBOE, a decline of 11% due to the upgrade of certain Delhi probable reserves to the proved category, sale of a portion of our Mississippian Lime leasehold back to the operator and downward revision of reserves per drilling location on that leasehold, partially offset by both additions and revisions in Delhi and in Lopez Fields. Probable Developed Reserves, all in Delhi, increased 34% over the prior year to 3.6 million barrels of oil with a PV-10 of $75 million. Probable Reserves are 71% crude oil and 9% NGL with an overall PV-10 of $135 million.

Possible Reserves, a new category, are located in the Delhi Field and total 3.7 MMBOE that are projected for the latter portion of the field's life. Possible Reserves are 92% crude oil, 6% NGL and 2% natural gas, and are 73% developed.  PV-10 of the Possible Reserves is $32 million, being heavily discounted for time since these added reserves are projected to occur primarily during the latter half of the Delhi Field life.

Evolution Petroleum's Chief Executive Officer, Robert S. Herlin, said: "We continue to be pleased with the performance of Delhi and its growing value.  Our reserves this year not only reflect additional development, upgrading and additions of crude oil reserves, but for the first time also reflect expected recovery of substantial volumes of natural gas and gas liquids that should also improve field operations."

"The June 2013 release of fluids in Delhi is likely to delay our working interest reversion and will temporarily constrain our royalty revenue into the second quarter of fiscal 2014, but should have no long term, material impact on value."

"While the first two evaluation wells in our Mississippian Lime project had poor results, we are engaged in testing the formation using drilling and completion methods similar to those reported on nearby successful wells. Our independent reservoir engineer continues to assign over 100 gross drilling locations to our existing leasehold footprint. Evolution owns a 34% interest in the joint venture's undeveloped leasehold." 

"Although reserves from our GARP® initiative are minimal so far, we continue to achieve success in installations, and our commercialization opportunities appear to be expanding."

Delhi Field


Reserves as of 6/30/2013


Oil


NGL


Gas


Equiv


PV-10


MBO


MBL


MMCF


MBOE


(MM)











Proved Developed

10,018






10,018


$380.3

Proved Undeveloped

2,556


971




3,528


75.0

Total Proved

12,574


971




13,546


$455.3











Probable Developed

3,561






3,561


75.2

Probable Undeveloped

1,834


1,035


5,889


3,851


34.2

Total Probable

5,395


1,035


5,889


7,412


$109.3











Possible Developed

2,671






2,671


22.8

Possible Undeveloped

730


193


566


1,017


9.6

Total Possible

3,401


193


566


3,688


$  32.5

Reserves were impacted by a number of variables during the year:

  • Continued development funded by the operator moved reserves from undeveloped to developed categories, more than offsetting production during the year. PV-10 of Delhi Proved and Proved Developed Reserves increased 11% and 17%, respectively.
  • Proved and Probable Reserves were revised upward due to an increase in the estimated original oil in place based on revised mapping.
  • Proved Reserves were revised upward, offset by a corresponding decline in Probable Reserves, for accelerated development of the May Equivalent reservoir previously projected for development at the end of the decade.
  • Proved and Probable Reserves were added through the incorporation of projected processing of recycled gas to recover methane and C5+ natural gas liquids. The recovery of methane should also improve CO2 flood efficiency and lower injection pressure.
  • Possible Reserves were added to reflect expected recovery of secondary oil reserves not recovered during the pressure maintenance phase of the field during the 1950's through 1990's due to lack of standard well spacing and secondary flood design. These reserves are scheduled for production in the latter portion of the field's life. Therefore the associated economic value is substantially discounted for time.

Due to the projected continued ramp up of production at Delhi into 2017, the PV-10 increases through 2016 even though we are harvesting substantial free cash flows net of capital expenditures.

Production at Delhi declined during the fourth quarter of fiscal 2013 due to reduced CO2 injection volumes in the western half of the field to accommodate infill drilling, scheduled plant maintenance and a release of fluids discovered in June that caused the operator to temporarily suspend CO2 injection in a portion of the field. The cause of the leak is believed to be one or more of two previously plugged wells. During the remediation, the operator has temporarily halted CO2 injection in the affected area in order to relieve pressure during the remediation. Production from wells in the affected area has continued, but oil production from those particular wells has declined due to the reduced injection volumes.

At this time, we are not working interest owners in the Holt Bryant Unit and therefore are not directly bearing any costs of the remediation, the total gross amount of which the operator has estimated to be at least $70 million. However, revenues to our royalty interest are being temporarily impacted by the reduction of oil production in the affected area.

The operator has stated that CO2 injection is expected to resume in the affected area by our second quarter of fiscal 2014, with oil response to follow. The reduced oil production and remediation costs, offset by insurance proceeds and reduced CO2 volume purchase costs, will delay the date that our reversionary working interest becomes effective, absent any indemnification or contractual assumption of obligations by the operator. The extent of the delay is uncertain, and could extend by several months or longer. The operator has also stated that CO2 injection and oil production in other parts of the field are continuing.

We have no expectation that ultimate field recoveries and reserves will be materially impacted and are continuing to monitor the field operations in our limited role as a nonworking interest royalty owner.

Mississippian Lime Project


Reserves as of 6/30/2013


Oil


Wet Gas


Equiv


PV-10


MBO


MMCF


MBOE


(MM)









Probable Undeveloped

2,028


7,518


3,281


$ 19.5

Total Probable

2,028


7,518


3,281


$ 19.5

Reserves declined from the previous year due to the sale of a portion of our joint venture interest to the operator, reducing our share from 45% to 33.9% in all undrilled sections, as well as a reduction of estimated reserves per drilling location. The reduced estimate of reserves per drilling location is due to poor results from our first two evaluation wells. After further analysis, we believe that these results may be the result of drilling the lateral well bore in the middle of the formation, whereas successful well results announced in the immediate area reflect well bore laterals positioned high in the formation. We are working with the operator to test our two wells higher in the formation to provide additional information.  If warranted, we may drill a third evaluation well in fiscal 2014 that could lead to an active development program. Our independent reservoir engineer assigned over 100 gross probable drilling locations on our leasehold.

Other Assets


Reserves as of 6/30/2013


Oil


NGL


Gas


Equiv


PV-10


MBO


MBL


MMCF


MBOE


(MM)











Proved Developed

60


9


23


72


$  1.8

Proved Undeveloped

149


_


_


149


1.9

Total Proved 

209


9


23


221


$  3.7











Probable Undeveloped

531






531


6.1

Total Probable

531






531


$  6.1

Proved Reserves in the Giddings Field were substantially reduced due to the divestment of all material non-GARP® producing wells and associated undeveloped assets totaling 2.3 MMBOE of divested Proved Reserves. Remaining reserves in Giddings are associated with two wells in which we obtained working interests in exchange for installing our GARP® technology.  No reserves are included yet for two additional wells in which GARP® was successfully installed around fiscal year end, the Phillip DL and the Appelt. In addition, we retain royalty interests of 3% to 5% in the EagleBine formations under almost 3,000 acres within the Giddings Field.   

Improved production from our producers in the Lopez Field resulted in positive revisions to reserves, both in the two producers and our 6 proved and 22 probable drilling locations. Our assets in the Lopez Field are scheduled for monetization during early fiscal 2014.

Summary Reserves


Reserves as of 6/30/2013 (1)


Oil

NGL

Gas

Equiv

PV-10


MBO

MBL

MMCF

MBOE

(MM)







Proved Developed

10,077

9

23

10,090

$382.1

Proved Undeveloped

2,705

971

_

3,676

76.8

Total Proved

12,783

980

23

13,766

$459.0







Probable Developed

3,561



3,561

75.2

Probable Undeveloped

4,393

1,035

13,407

7,663

59.8

Total Probable

7,954

1,035

13,407

11,224

$135.0







Possible Developed

2,671



2,671

22.8

Possible Undeveloped

730

193

566

1,017

9.7

Total Possible

3,401

193

566

3,688

$  32.5

Note: numbers in tables may not sum due to rounding.

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 producing wells and proved drilling locations in the Lopez Field in Texas.  Other assets include an interest in a joint venture in the Mississippian Lime play in Kay County, OK with probable reserves and a patented artificial lift technology designed to extend the life and ultimate recoveries of 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



2013


2012






Estimated future net revenues


$

865,335,587


$

858,510,526

10% annual discount for estimated timing of future cash flows


(406,373,713)


(412,995,901)

Estimated future net revenues discounted at 10% (PV-10)


458,961,874


445,514,625

Estimated future income tax expenses discounted at 10%


(151,741,175)


(161,917,132)

Standardized Measure


$

307,220,699


$

283,597,493

 

Company Contact:
Sterling McDonald, VP & CFO
(713) 935-0122
smcdonald@evolutionpetroleum.com

SOURCE Evolution Petroleum Corporation




Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.