Evolution Petroleum Reports Fiscal 2010 Second Quarter Operational and Financial Results
HOUSTON, Feb. 16 /PRNewswire-FirstCall/ -- Evolution Petroleum Corporation (NYSE Amex : EPM) today reported financial and operating results for the three months ended December 31, 2009, the second quarter of the Company's fiscal year ("Q2-10").
Oil and gas volumes in Q2-10 increased 22% to 31,238 barrels of oil equivalent ("BOE"), or 340 BOE per day, compared to the three months ended December 31, 2008 ("Q2-09"). Oil and gas revenues in Q2-10 increased 16% to $1.2 million compared to $1.0 million for Q2-09, due to the increase in sales volumes, partially offset by a 5% decline in blended oil and gas prices from $40.29 per BOE in Q2-09 to $38.46 per BOE in Q2-10. The increase in volumes was the result of drilling and work-over operations in the Giddings Field in central Texas.
Sequentially, volumes were 11% lower and revenues were 3% higher in Q2-10 compared to Q1-10. Lower sequential production volumes were in large part due to constrained production from the Hilton-Yegua well due to suspected blockage within its lateral section and downtime in other wells due to operational issues, which have since been corrected or are expected to be corrected shortly. The revenue increase was due to a 15% improvement in blended product prices realized in Q2-10 versus Q1-10, primarily due to improved natural gas prices.
Net loss in Q2-10 declined 30% to $0.7 million, or $(0.03) per share, compared to a net loss in Q2-09 of $1.0 million, or $(0.04) per share. Improved results in Q2-10 over Q2-09 were primarily due to a 25% reduction in G&A expenses and 3% higher revenues. Results for both periods included $0.55 million and $0.50 million, respectively, in non-cash depreciation, depletion and amortization, plus non-cash stock-based compensation expense of approximately $0.42 million and $0.58 million charged in Q2-10 and Q2-09, respectively.
For the first six months of fiscal 2010, net cash provided by operating activities was $0.3 million, compared to $6.4 million for the first six months of fiscal 2009. The prior period was higher primarily due to 85% higher realized product prices and the collection of a $4.1 million of income taxes receivable.
Working capital was $5.7 million on December 31, 2009, as compared to $7.6 million at June 30, 2009. The $1.9 million decrease was primarily due to investments in oil and natural gas properties. The company ended the fiscal second quarter with no outstanding debt and sufficient working capital to complete its fiscal 2010 capital budget.
Robert Herlin, President and Chief Executive Officer, commented, "Per our operating plan, we continue to cover our overhead expenses from Giddings operations, while utilizing our working capital to upgrade and test our development projects in Oklahoma and South Texas."
The Caney Shale vertical test well in Wagoner County, Oklahoma, is producing at a steady 25 mcf/d without water and no apparent decline, confirming that the Caney Shale can contribute commercial gas volumes as an add-on to Woodford production. The Woodford Shale vertical test well exhibited a strong initial gas rate with the expected rate of dewatering. Testing will resume as soon as the associated water disposal well is deepened to expand capacity. Separately, Evolution is planning a vertical well test of its medium depth Woodford/Caney Shales in Haskell County, Oklahoma, before the end of the fiscal year.
In South Texas, the Company expects to begin oil production shortly from the first two wells in its Neptune project, following completion of a water injection well. Evolution has identified an additional 112 potential drilling locations there. Field work in South Texas, as in Oklahoma, has been hampered by unusual levels of bad weather.
Mr. Herlin further added "The Delhi enhanced oil recovery project appears to continue on schedule with strong rates of CO2 injection and we expect first oil production by mid-2010. Our proprietary artificial lift technology continues to operate successfully in our two test well sites, and we are in discussions with other operators about demonstrating our technology on their wells. Our operating plan for fiscal 2010 includes testing and proving commerciality of our Oklahoma gas shale, South Texas infill oil and our lift technology projects, and we appear to be on schedule on all fronts. We are also moving forward on our plan to monetize up to 29 proved and probable undeveloped drilling locations in the Giddings Field, through one or more industry joint ventures."
In the Giddings Field, operating costs have declined due, in large part, to the completion of the dedicated water disposal well drilled in the first quarter and placed into service during the second quarter. The approved capital budget for fiscal 2010 provides for a number of well workovers to maintain or increase production, including a lateral cleanout of the Hilton-Yegua well scheduled for the third fiscal quarter.
Production Volumes and Prices:
Net volumes for Q2-10 were 13,019 barrels ("Bbl") of oil, condensate and natural gas liquids ("NGL") and 109.3 million cubic feet of natural gas ("MMCF"), or 31,238 BOE. This is an increase of 22% over volumes for Q2-09 of 14,780 Bbls of oil, condensate and NGLs and 65.0 MMCF of natural gas, or 25,609 BOE. The average realized price of oil increased 30% to $74.47 per barrel in Q2-10 from $57.37 per barrel in Q2-09, while the average realized price of NGLs increased 33% in Q2-10 to $40.66 per barrel from $30.63 per barrel in Q2-09. The average realized price of natural gas fell 29% to $4.25 per Mcf in Q2-10 versus $5.99 per Mcf in Q2-09. On a BOE basis, the blended effective price received declined 5% to $38.46 in Q2-10 from $40.29 in Q2-09, due to lower average natural gas prices and Q2-10 sales including a higher portion of natural gas, offset in part by higher oil and NGL prices.
Costs and Expenses
Lease operating expenses ("LOE"), including production severance taxes, for Q2-10 increased 15% to $0.39 million, but declined on a per BOE basis to $12.37 compared to $0.34 million ($13.09 per BOE) for Q2-09. The gross increase was primarily due to the addition of three producing wells and ad valorem taxes assessed in calendar year 2009.
Depreciation, Depletion & Amortization Expense ("DD&A") was $0.55 million ($17.27 per BOE) for Q2-10 compared to $0.50 million ($19.31 per BOE) in Q2-09. The reduction in the DD&A rate was due primarily to a reduction in projected capital expenditures associated with proved undeveloped locations in the Giddings Field.
General and administrative ("G&A") expense declined 25% to $1.3 million for Q2-10, as compared to $1.7 million for Q2-09, due to a decrease in non-cash stock-based compensation expense, which was $0.42 million (34% of total G&A) and $0.58 million (35% of total G&A) for Q2-10 and Q2-09, respectively, a 28% reduction in personnel costs from approximately $750,000 to $540,000 due to a reduction in staff and estimated annual bonus payments, and a reduction of legal fees of approximately $115,000 due to the settlement of the Delhi litigation in July 2009.
Conference Call
Evolution Petroleum will host a conference call today at 10:30 a.m. Eastern Time (9:30 a.m. Central) to discuss its fiscal second quarter 2010 results. To access the call, please dial 480-629-9773 and ask for the Evolution Petroleum call at least 10 minutes prior to the start time. 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, where it will also be archived for replay. A telephonic replay of the conference call will be available until February 23, 2010 and may be accessed by calling 303-590-3030 and using the pass code 4220160#. For more information, please contact Donna Washburn at DRG&E at (713) 529-6000 or email at [email protected].
About Evolution Petroleum
Evolution Petroleum Corporation (http://www.evolutionpetroleum.com) acquires known, onshore oil and gas resources and applies conventional and specialized technology to accelerate production and develop incremental reserves and value. The Company is well positioned to continue its development projects in CO2 based EOR, bypassed resources and low cost shale gas. Principal assets as of July 1, 2009 include 3.9 MMBOE of proved and probable reserves in the Giddings Field of Central Texas, 0.5 MMBO of proved and unproved reserves with 90+ additional locations in South Texas, 13.6 MMBO of probable reserves in the Delhi CO2 EOR project in northeast Louisiana, 17,780 net acres of leases in shallow gas shale in Eastern Oklahoma and a proprietary artificial lift technology intended 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, can be accessed on its website.
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 volumes, realize success in our drilling and development activity, 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.
Company Contact: |
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Sterling McDonald, VP & CFO |
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(713) 935-0122 |
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Lisa Elliott / [email protected] |
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Jack Lascar / [email protected] |
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DRG&E / 713-529-6600 |
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- Tables to Follow - |
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Evolution Petroleum Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Revenues
Crude
oil $456,375 $407,194 $959,497 $1,986,264
Natural
gas
liquids 280,212 235,293 565,523 990,738
Natural
gas 464,715 389,295 846,309 969,766
------- ------- ------- -------
Total
revenues 1,201,302 1,031,782 2,371,329 3,946,768
--------- --------- --------- ---------
Operating Costs
Lease operating
expense 369,928 313,406 734,774 649,310
Production
taxes 16,459 21,776 34,826 107,772
Depreciation,
depletion
and amortization 550,142 504,291 1,167,899 1,149,173
Accretion of
asset retirement
obligations 15,200 6,124 29,538 11,861
General and
administra-
tive* 1,253,596 1,662,627 2,506,712 3,127,467
--------- --------- --------- ---------
Total
operating
costs 2,205,325 2,508,224 4,473,749 5,045,583
--------- --------- --------- ---------
Loss from
operations (1,004,023) (1,476,442) (2,102,420) (1,098,815)
Other income
Interest
income 13,785 17,782 29,009 91,428
------ ------ ------ ------
Net loss before
income tax
benefit (990,238) (1,458,660) (2,073,411) (1,007,387)
Income tax
benefit 288,298 454,889 666,646 152,053
------- ------- ------- -------
Net loss $(701,940) $(1,003,771) $(1,406,765) $(855,334)
========= =========== =========== =========
Loss per common
share
Basic and
Diluted $(0.03) $(0.04) $(0.05) $(0.03)
====== ====== ====== ======
Weighted average
number of common
shares
Basic and
Diluted 27,092,954 26,399,988 26,869,488 26,646,149
========== ========== ========== ==========
* General and administrative expenses for the three month period ended
December 31, 2009 and 2008 included non-cash stock-based compensation
expense of $424,800 and $584,525, respectively. General and
administrative expenses for the six month period ended
December 31, 2009 and 2008 included non-cash stock-based compensation
expense of $816,436 and $1,108,250, respectively.
Evolution Petroleum Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
December 31, June 30,
2009 2009
---- ----
Assets
Current assets
Cash and cash equivalents $2,312,212 $3,891,764
Certificates of deposit 1,651,835 2,059,147
Receivables
Oil and natural gas sales 542,738 532,318
Income taxes 2,095,126 -
Other 61,245 172,314
Income taxes recoverable - 2,055,802
Prepaid expenses and other
current assets 148,260 162,441
------- -------
Total current assets 6,811,416 8,873,786
--------- ---------
Property and equipment, net
of depreciation, depletion,
and amortization
Oil and natural gas
properties - full-cost
method of accounting, of
which $11,082,567 and
$9,819,465 at December 31,
2009 and June 30, 2009,
respectively, were excluded
from amortization. 29,801,618 28,751,178
Other property and equipment 123,271 150,697
------- -------
Total property and equipment 29,924,889 28,901,875
---------- ----------
Other assets 53,007 53,162
------ ------
Total assets $36,789,312 $37,828,823
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $747,476 $690,639
Accrued liabilities 100,028 171,052
Royalties payable 262,127 218,477
State taxes payable - 157,736
--- -------
Total current liabilities 1,109,631 1,237,904
Long-term liabilities
Deferred income taxes 3,095,161 3,721,317
Asset retirement obligations 758,027 664,710
Stock bonus (Note 5) - 370,440
Accrued compensation 210,000 -
Deferred rent 79,746 77,858
------ ------
Total liabilities 5,252,565 6,072,229
--------- ---------
Commitments and contingencies
(Note 10)
Stockholders' equity
Preferred stock, par value
$0.001; 5,000,000 shares
authorized; no shares issued
or outstanding - -
Common stock; par value
$0.001; 100,000,000 shares
authorized; issued
27,949,283 shares and
27,318,517 shares as of
December 31, 2009 and June
30, 2009, respectively;
outstanding 27,161,083
shares and 26,530,317 shares
as of December 31, 2009 and
June 30, 2009, respectively 27,949 27,318
Additional paid-in capital 17,611,155 16,424,868
Retained earnings 14,779,665 16,186,430
---------- ----------
32,418,769 32,638,616
Treasury stock, at cost,
788,200 shares as of
December 31, 2009 and
June 30, 2009. (882,022) (882,022)
-------- --------
Total stockholders' equity 31,536,747 31,756,594
---------- ----------
Total liabilities and
stockholders' equity $36,789,312 $37,828,823
=========== ===========
Evolution Petroleum Corporation and Subsidiaries
Consolidated Statements of Cash Flow
(Unaudited)
Six Months Ended
December 31,
------------
2009 2008
---- ----
Cash flows from operating
activities
Net loss $(1,406,765) $(855,334)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation, depletion and
amortization 1,167,899 1,149,173
Stock-based compensation 816,436 1,108,250
Accretion of asset retirement
obligations 29,538 11,861
Deferred income taxes (626,156) (219,008)
Deferred rent 1,888 1,888
Other 213,118 3,118
Changes in operating assets
and liabilities
Receivables from oil and
natural gas sales (10,420) 1,658,525
Receivables from income taxes
and other 71,745 4,031,914
Prepaid expenses and other
current assets 14,181 113,942
Accounts payable and accrued
expenses 139,474 (314,436)
Royalties payable 43,650 (282,051)
State taxes payable (157,736) -
-------- ---
Net cash provided by operating
activities 296,852 6,407,842
------- ---------
Cash flows from investing
activities
Development of oil and natural
gas properties (2,222,654) (4,723,006)
Acquisitions of oil and
natural gas properties (58,141) (2,033,874)
Capital expenditures for other
equipment - (26,602)
Purchases of certificates of
deposit (1,350,000) (1,500,000)
Maturities of certificates of
deposit 1,757,312 -
Other assets (2,963) -
------ ---
Net cash used in investing
activities (1,876,446) (8,283,482)
---------- ----------
Cash flows from financing
activities
Proceeds from the issuance of
restricted common stock 42 90
Purchase of treasury stock - (882,022)
--- --------
Net cash provided (used in) by
financing activities 42 (881,932)
--- --------
Net decrease in cash and cash
equivalents (1,579,552) (2,757,572)
Cash and cash equivalents,
beginning of period 3,891,764 11,272,280
--------- ----------
Cash and cash equivalents, end
of period $2,312,212 $8,514,708
========== ==========
Our supplemental disclosures of cash flow information for the six months
ended December 31, 2009 and 2008 are as follows:
Six Months Ended
December 31,
------------
2009 2008
---- ----
Income taxes paid $166,015 $15,000
Income tax refunds and carry backs
received $ - $4,052,631
Non-cash transactions:
Decrease in accounts payable used
to acquire oil and natural
gas leasehold interests and
develop oil and natural
gas properties $(153,661) $(285,333)
Oil and natural gas properties
incurred through recognition of
asset retirement
Obligations $63,779 $107,751
Common stock issued in lieu of a
portion of 2008 cash bonus accrued
as a short-term liability at
June 30, 2008 $ - $168,462
Evolution Petroleum Corporation and Subsidiaries
Condensed Operating Data
(Unaudited)
Three Months Ended
December 31,
------------ %
2009 2008 Variance change
---- ---- -------- ------
Sales Volumes, net
to the Company:
Crude oil (Bbl) 6,128 7,098 (970) (14)%
NGLs (Bbl) 6,891 7,682 (791) (10)%
Natural gas (Mcf) 109,316 64,973 44,343 68%
------- ------ ------ ---
Crude oil, NGLs
and natural gas
(BOE) 31,238 25,609 5,629 22%
Revenue data:
Crude oil $456,375 $407,194 $49,181 12%
NGLs 280,212 235,293 44,919 19%
Natural gas 464,715 389,295 75,420 19%
------- ------- ------ ---
Total revenues $1,201,302 $1,031,782 $169,520 16%
Average price:
Crude oil (per Bbl) $74.47 $57.37 $17.10 30%
NGLs (per Bbl) 40.66 30.63 10.03 33%
Natural gas (per Mcf) 4.25 5.99 (1.74) (29)%
---- ---- ----- ---
Crude oil, NGLs
and natural gas
(per BOE) $38.46 $40.29 $(1.83) (5)%
Expenses (per BOE)
Lease operating expenses
and production taxes $12.37 $13.09 $(0.72) (6)%
Depletion expense on oil
and natural gas
properties (a) $17.27 $19.31 $(2.04) (11)%
(a) Excludes depreciation of office equipment, furniture and fixtures
and other equipment of $10,799 and $9,794, for the three months ended
December 31, 2009 and 2008, respectively.
Evolution Petroleum Corporation and Subsidiaries
Condensed Operating Data
(Unaudited)
Six Months Ended
December 31,
------------ %
2009 2008 Variance change
---- ---- -------- ------
Sales Volumes, net
to the Company:
Crude oil (Bbl) 13,698 19,933 (6,235) (31)%
NGLs (Bbl) 15,762 18,745 (2,983) (16)%
Natural gas (Mcf) 220,696 126,119 94,577 75%
------- ------- ------ ---
Crude oil, NGLs
and natural gas
(BOE) 66,243 59,698 6,545 11%
Revenue data:
Crude oil $959,497 $1,986,264 $(1,026,767) (52)%
NGLs 565,523 990,738 (425,215) (43)%
Natural gas 846,309 969,766 (123,457) (13)%
------- ------- -------- ---
Total revenues $2,371,329 $3,946,768 $(1,575,439) (40)%
Average price:
Crude oil (per Bbl) $70.05 $99.65 $(29.60) (30)%
NGLs (per Bbl) 35.88 52.85 (16.97) (32)%
Natural gas (per Mcf) 3.83 7.69 (3.86) (50)%
---- ---- ----- ---
Crude oil, NGLs
and natural gas
(per BOE) $35.80 $66.11 $(30.31) (46)%
Expenses (per BOE)
Lease operating expenses
and production taxes $11.62 $12.68 $(1.06) (8)%
Depletion expense on oil
and natural gas
properties (a) $17.22 $18.92 $(1.70) (9)%
(a) Excludes depreciation of office equipment, furniture and fixtures,
and other of $24,293 and $19,618, for the six months ended
December 31, 2009 and 2008, respectively.
SOURCE Evolution Petroleum Corporation
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