HOUSTON, May 19, 2015 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE MKT: EPM) ("Evolution" or the "Company") announced today that its Board of Directors approved a share repurchase program covering up to $5,000,000 of the Company's common stock. Under the program's terms, shares may be repurchased only on the open market and in accordance with the requirements of the Securities and Exchange Commission. The timing and amount of repurchases will depend upon several factors, including financial resources and market and business conditions. There is no fixed termination date for this repurchase program, and the repurchase program may be suspended or discontinued at any time. Payment for shares repurchased under the program will be funded using the Company's working capital. The Company intends to retire the repurchased shares.
Robert Herlin, Chief Executive Officer, said: "This share repurchase program underscores our confidence in the quality of our assets and ability to generate cash flow across business cycles. Our cash flow forecast through fiscal 2016 and current liquidity exceed our expected financial needs, including projected capital expenditures in the Delhi field, continued commercialization of our artificial lift technology and our current rate of common dividends. At recent market price levels, we consider our common stock to be undervalued and believe that repurchasing shares is a responsible way to return excess cash back to shareholders.
"It is notable that we are not leveraging the balance sheet with debt and increasing our financial risk in this historically cyclical industry to fund the program, and we retain the full flexibility of our undrawn credit facility. We considered the option of increasing our regular common stock dividend, but determined that the current uncertainty of oil prices and our capital commitments for the NGL plant in the Delhi field made this option less attractive than the repurchase program. We look forward to a possible increase in the common stock dividend during calendar 2016 when increased cash flow from the NGL plant should give us greater financial resources and better long-term visibility with respect to our financial performance."
Randy Keys, President and CFO, added: "We do not believe our current stock price adequately reflects the exceptionally long life and quality of our reserves and the predictability of our production profile, nor does it reasonably account for the near term catalysts for growth from the NGL plant and the expansion of the CO2 flood in the eastern part of the field. In addition, we have a strong balance sheet with no debt. Based on our most recent reserves report, production from the Delhi field is forecast to increase and, as a result, so is the expected PV-10* value of the field over the next several years while simultaneously generating significant free cash flow.
"The Delhi field is approximately 70% developed with substantially all the major infrastructure, including the CO2 pipeline, compression facilities and the majority of the CO2 injection and production wells, already in place. Based on the same reserves report, the incremental cost to complete the NGL plant and expand the CO2 flood to the eastern part of the field is estimated to be approximately $8.50 per barrel for remaining development of the proved reserves. The incremental capital cost associated with our probable reserves is only $3.30 per barrel since approximately 45% of our probable reserves are already developed, and there is no incremental capital cost associated with our possible reserves as they are incremental to previous capital expenditures. It is notable that the probable and possible reserves are associated largely with recovering more oil already in place in and around the existing wellbores."
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 include interests in a CO2-EOR project in Louisiana's Delhi field and a patented technology designed to extend the life and increase ultimate recoveries of depletion drive oil and gas wells. 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. Additional information regarding GARP® is available on the www.garplift.com website.
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. 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, income, cash flows, dividends 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. Many 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. We believe that 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. Probable reserves are not recognized by GAAP, and therefore the PV-10 of probable reserves cannot be reconciled to a GAAP measure.
The SEC's current rules allow oil and gas companies to disclose not only Proved reserves, but also Probable and Possible reserves that meet the SEC's definitions of such terms. We disclose Proved, Probable and Possible reserves in our filings with the SEC. Probable and Possible reserves are by their nature more speculative than estimates of Proved reserves and are subject to greater uncertainties, and accordingly the likelihood of recovering those reserves is subject to substantially greater risk.
Randy Keys, President and CFO
SOURCE Evolution Petroleum Corporation