Evolution Petroleum Reports Results for Quarter Ending September 30, 2013

HOUSTON, Nov. 6, 2013 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE MKT: EPM) today reported operating highlights for the current quarter of fiscal 2014 ending September 30, 2013, with comparisons to the previous quarter ending June 30, 2013, and the year-ago quarter ending September 30, 2012.

Quarterly highlights include:

  • Earned $1.3 million, or $0.04 per diluted share, a 32% increase over the year-ago quarter and a 38% increase over the previous quarter
  • Generated revenues of $4.6 million, an 8% increase over the year-ago quarter and a 14% decrease from the previous quarter
  • Delhi production of 438 net barrels of oil ("BO") per day (5,912 gross), an increase of 17% over the year-ago quarter and a decrease of 18% from the previous quarter
  • Resumption of injection adjacent to remediated area of the Delhi Field

Results for the current quarter were adversely impacted by the previously disclosed remediation work temporarily ongoing at the Delhi Field. Operating results in the field are expected to gradually improve in the second quarter of fiscal 2014 as production is beginning to respond to development work completed in calendar 2012 and 2013. Additional production improvement is expected due to the reported resumption of CO2 injection adjacent to the portion of the field directly affected by the fluids release. The operator has further reported that remediation is nearly complete.

Compared to the year-ago quarter, results were also impacted by the sale of all producing properties in the Giddings Field in Texas other than our GARP® installed wells. Giddings property sales were effective in December 2012 and June 2013.

Meanwhile, a sixth commercial installation of GARP® was completed and brought on line in the Appelt well in the Giddings Field with good results.

Robert Herlin, President and CEO, said: "We were able to generate improved earnings and considerable net cash flow during the quarter despite the temporary effects of the Delhi remediation and the permanent effects of the Giddings property sales.  We expect the Delhi Field to resume its production growth and the company to begin benefitting from our reversionary working interest later in fiscal 2014. These catalysts, combined with the growth potential from our GARP® technology, continue to support our intent to begin directly sharing our success with shareholders, while funding growth capital expenditures at Delhi and in our GARP® business."

Financial Results

Revenues in the current quarter were $4.6 million, a sequential decline from the previous quarter of 14% and an increase of 8% over the year-ago quarter.  Net income to common shareholders was $1.3 million, or $0.04 per diluted share, an increase of 38% over the previous quarter's $0.9 million ($0.03 per diluted share) and an increase of 32% over the $1.0 million in the year-ago quarter ($0.03 per diluted share).

Compared to the previous quarter, oil production declined 19% to 454 BO per day on a 5% higher oil price of $109.80 per barrel.  Total volumes for the current quarter were 474 barrels of oil equivalent ("BOE") per day compared to 583 BOE per day in the previous quarter. Compared to the year-ago quarter, oil production increased 7% on a 7% higher average oil price. NGL and natural gas volumes declined 87% from 156 BOE per day in the year-ago quarter to 20 BOE per day, contributing 7% of revenues during the year-ago quarter compared to less than 1% in the current quarter. The property sales of all of our non-GARP® producing assets in the Giddings Field were the primary factors in the decrease in NGL and natural gas volumes and partially offset our growth in Delhi oil volumes from the year-ago quarter.

Lease operating expense declined 10% to $0.4 million compared to the previous quarter and increased 30% over the year-ago quarter. The increase over the year-ago quarter was primarily due to added GARP® installations and work-overs in our two wells in the Mississippian Lime project and our two producers in the Lopez Field in South Texas. Those factors also partially offset the effect of the Giddings property sales that generated the decline from the year-ago quarter. Lease operating expense per BOE increased to $9.58 compared to $8.75 in the previous quarter and $6.32 in the year-ago quarter.

General and administrative expense was $1.9 million, a 12% decrease from the previous quarter and a 13% increase over the year-ago quarter. The decrease from the prior quarter was primarily due to nonrecurring items in the previous quarter including the Delhi NGL study and costs of updating our registration statements, as well as year-end adjustments to the bonus accrual. The increase from the year-ago quarter was due primarily to increased compensation and investor relations expense.

Delhi Field

Delhi volumes declined 18% from the previous quarter to 438 net BO per day (5,912 gross). While production was 17% greater than the year-ago quarter's 375 net BO per day (5,057 gross BO), production continued to be adversely impacted by the previously disclosed remediation of the June 2013 fluids release. CO2 injection in the area of the field surrounding the fluids release was temporarily suspended in June in order to lower reservoir pressure that supports oil production. Accordingly, this action lowered oil production in the affected area. The operator has stated that remediation is nearly complete, expected total gross remediation costs by the operator are now estimated to be $98 million, and the previously abandoned well believed to be the source of the fluids has been re-plugged. Furthermore, CO2 injection has resumed adjacent to the area affected by the fluids release.  In addition, the operator is continuing work to plug a nearby well as a precaution and expects to re-plug additional wells in the field. Resumption of injection should begin restoring oil production in the affected area, and overall field performance should begin reflecting response from development work in calendar 2012 through the first half of calendar 2013. As previously reported, the temporary reduction in oil production and increase in field costs, partially offset by lower CO2 purchase costs, insurance recoveries and application of the operator's indemnification of EPM (which is being disputed by the operator), are expected to delay reversion of our 24% working interest from the previous forecast of late calendar 2013. Any delay in the reversion would be partially offset by a corresponding reduction in our previously projected net capital expenditures at Delhi.

Looking forward, gross production at Delhi is projected in our June 30, 2013 independent reserves report to exceed 12,000 BO per day plus associated NGLs and natural gas in calendar 2017.

GARP®

We continued commercialization work related to our patented artificial lift technology trademarked as GARP®, or gas assisted rod pump. The technology was installed in the Appelt well in the Giddings Field and resulted in production increasing from near zero rate to approximately 8 BO per day plus a small amount of natural gas. Previous installations of GARP® continue to perform as expected. Accordingly, we are intensifying our efforts to expand and commercialize this core business and expect to provide additional details in the near term.

Mississippian Lime Project

The operator completed the test of the Hendrickson well in the upper portion of the formation with marginal results. The well was then recompleted into a Skinner reservoir as a producing oil well. The operator has proposed a new test of the Mississippian Lime that we are considering.

Conference Call

As previously announced, Evolution Petroleum will host a conference call on Thursday, November 7th at 11:00 a.m. (10:00 a.m. Central) to discuss results. To access the call, please dial 1-877-317-6789 (U.S.), 1-412-317-6789 (International) or 1-866-605-3852 (Canada). To listen live or hear a rebroadcast, please go to http://www.evolutionpetroleum.com. A replay will be available one hour after the end of the conference call through November 22, 2013 at 9:00 a.m. Eastern Time by calling 1-877-344-7529 (U.S.) or 1-412-317-0088 (Canada/International) and providing the passcode 10036498. The webcast will also be archived on the Company's website.

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 in Texas and an interest in a joint venture in the Mississippian Lime play in Kay County, OK. 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.

Financial Tables to Follow




Evolution Petroleum Corporation and Subsidiaries
Consolidated Condensed Statements of Operations
(Unaudited)




Three Months Ended




September 30,





2013



2012


Revenues








Crude oil


$

4,591,377


$

4,005,422


Natural gas liquids



24,146



119,611


Natural gas



18,176



166,513


Total revenues



4,633,699



4,291,546










Operating Costs








Lease operating expenses



409,847



316,169


Production taxes



8,403



21,373


Depreciation, depletion and amortization



309,673



296,917


Accretion of discount on asset retirement obligations



12,928



21,107


General and administrative expenses *



1,928,951



1,705,424


Total operating costs



2,669,802



2,360,990


Income from operations



1,963,897



1,930,556










Other








Interest income



7,703



5,616


Interest (expense)



(16,513)



(16,428)





(8,810)



(10,812)










Income before income taxes



1,955,087



1,919,744










Income tax provision



482,636



760,218










Net Income


$

1,472,451


$

1,159,526










Dividends on Preferred Stock



168,575



168,575










Net income available to common shareholders


$

1,303,876


$

990,951










Basic


$

0.05


$

0.04










Diluted


$

0.04


$

0.03










Weighted average number of common shares
















Basic



28,607,320



27,938,297










Diluted



32,211,265



31,763,488

















 *General and administrative expenses for the three months ended September 30, 2013 and 2012 included non-cash stock-based compensation expense of $373,438 and $353,790, respectively.

 








Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Balance Sheets

(Unaudited)




September 30,


June 30,




2013


2013


Assets








Current assets








Cash and cash equivalents


$

25,677,097


$

24,928,585


Certificates of deposit



250,000



250,000


Receivables








Oil and natural gas sales



1,621,720



1,632,853


Income taxes



281,970



281,970


Joint interest partner



21,784



49,063


Other



---



918


Deferred tax asset



26,133



26,133


Prepaid expenses and other current assets



212,606



266,554


Total current assets



28,091,310



27,436,076










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








Oil and natural gas properties — full-cost method of accounting, of which $4,161,816 and $4,112,704 at September 30, 2013 and June 30, 2013, respectively, were excluded from amortization



38,923,477



38,789,032


Other property and equipment



45,531



52,217


Total property and equipment



38,969,008



38,841,249










Advances to joint interest operating partner



46,364



26,059


Other assets



243,377



252,912










Total assets


$

67,350,059


$

66,556,296










Liabilities and Stockholders' Equity








Current liabilities








Accounts payable


$

279,566


$

642,018


Due to joint interest partner



100,347



127,081


Accrued compensation



392,474



1,385,494


Royalties payable



131,457



91,427


Income taxes payable



638,225



233,548


Other current liabilities



663,488



153,182


Total current liabilities



2,205,557



2,632,750










Long term liabilities








Deferred income taxes



8,491,364



8,418,969


Asset retirement obligations



201,416



615,551


Deferred rent



48,579



52,865










Total liabilities



10,946,916



11,720,135










Commitments and contingencies (Note 11)
















Stockholders' equity








Preferred stock, par value $0.001; 5,000,000 shares authorized:8.5% Series A Cumulative Preferred Stock, 1,000,000 shares authorized, 317,319 shares issued and outstanding at September 30, 2013, and June 30, 2013 with a liquidation preference of $7,932,975 ($25.00 per share)



317



317


Common stock; par value $0.001; 100,000,000 shares authorized: issued 28,599,669 shares at September 30, 2013, and 29,410,858 at June 30, 2013; outstanding 28,599,669 shares and 28,608,969 shares as of September 30, 2013 and June 30, 2013, respectively



28,599



29,410


Additional paid-in capital



31,057,316



31,813,239


Retained earnings



25,316,911



24,013,035





56,403,143



55,856,001


Treasury stock, at cost, no shares and 801,889 shares as of September 30, 2013 and June 30, 2013, respectively



---



(1,019,840)










Total stockholders' equity



56,403,143



54,836,161










Total liabilities and stockholders' equity


$

67,350,059


$

66,556,296



Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(Unaudited)




Three Months Ended

September 30,




2013


2012


Cash flows from operating activities








Net Income


$

1,472,451


$

1,159,526


Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation, depletion and amortization



319,885



307,129


Stock-based compensation



373,438



353,790


Accretion of discount on asset retirement obligations



12,928



21,107


Settlements of asset retirement obligations



---



(22,211)


Deferred income taxes



72,395



599,052


Deferred rent



(4,286)



(4,287)


Changes in operating assets and liabilities:








Receivables from oil and natural gas sales



11,133



(273,168)


Receivables from income taxes and other



918




Due to/from joint interest partner



(14,614)



(49,344)


Prepaid expenses and other current assets



53,948



56,630


Accounts payable and accrued expenses



(1,186,110)



(637,799)


Royalties payable



40,030



(51,810)


Income taxes payable



404,677



161,166


Net cash provided by operating activities



1,556,793



1,619,781










Cash flows from investing activities








Proceeds from asset sales



66,753



---


Acquisitions of oil and natural gas properties



(50,154)



(743,720)


Development of oil and natural gas properties



(544,060)



(1,868,892)


Advances to joint venture operating partner



---



(101,790)


Other assets



(1,913)



(14,684)


Net cash used in investing activities



(529,374)



(2,729,086)










Cash flows from financing activities








Preferred stock dividends paid



(168,575)



(168,575)


Purchases of treasury stock



(117,182)



---


Recovery of short swing profits



6,850



---


Deferred loan costs



---



(16,211)


Net cash used in financing activities



(278,907)



(184,786)










Net increase (decrease) in cash and cash equivalents



748,512



(1,294,091)










Cash and cash equivalents, beginning of period



24,928,585



14,428,548










Cash and cash equivalents, end of period


$

25,677,097


$

13,134,457


 


Our supplemental disclosures of cash flow information:




Three Months Ended




September 30,




2013


2012


Income taxes paid


$


$










Non-cash transactions:








Change in accounts payable used to acquire oil and natural gas leasehold interests and develop oil and natural gas properties



(131,290)



124,372


Change in due to joint interest partner used to acquire oil and natural gas leasehold interests and develop oil and natural gas properties



(5,146)



(646,932)


Oil and natural gas properties incurred through recognition of asset retirement obligations



45,172



8,558


 




Results of Operations - Quarter




Three Months Ended









September 30,





%




2013


2012


Variance


Change















Sales Volumes, net to the Company:


























Crude oil (Bbl)



41,815



39,082



2,733


7.0

%














NGLs (Bbl)



797



3,381



(2,584)


(76.4)%















Natural gas (Mcf)



6,187



65,869



(59,682)


(90.6)%


Crude oil, NGLs and natural gas (BOE)



43,643



53,441



(9,798)


(18.3)%















Revenue data:


























Crude oil


$

4,591,377


$

4,005,422


$

585,955


14.6

%














NGLs



24,146



119,611



(95,465)


(79.8)%















Natural gas



18,176



166,513



(148,337)


(89.1)%


Total revenues


$

4,633,699


$

4,291,546


$

342,153


8.0

%














Average price:













Crude oil (per Bbl)


$

109.80


$

102.49


$

7.31


7.1

%

NGLs (per Bbl)



30.30



35.38



(5.08)


(14.6)%


Natural gas (per Mcf)



2.94



2.53



0.41


16.2

%

Crude oil, NGLs and natural gas (per BOE)


$

106.17


$

80.30


$

25.87


32.2

%














Expenses (per BOE)













Lease operating expense


$

9.39


$

5.92


$

3.47


58.6

%

Production taxes


$

0.19


$

0.40


$

(0.21)


(52.5)%


Depletion expense on oil and natural gas properties (a) 


$

6.91


$

5.33


$

1.58


29.6

%
























  (a) Excludes depreciation of office equipment, furniture and fixtures, and other assets of $7,921 and $12,249, for the three months ended September 30, 2013 and 2012, respectively.

 

Company Contact:

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

 

SOURCE Evolution Petroleum Corporation



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