Evolution Petroleum Reports Project Updates

- Mississippian Lime drilling program underway

- Second Lopez Field oil producer exceeds expectations

- Second positive test of GARP™ technology

Jun 26, 2012, 08:00 ET from Evolution Petroleum Corporation

HOUSTON, June 26, 2012 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE Amex: EPM) today provided operational results for recent work in its Mississippian Lime (OK), Lopez Field (South Texas) and GARP™ projects.

Mississippi Lime Joint Venture We previously announced a joint venture ("JV") with a private company to reinvest near-term Delhi cash flows into the oil-prone Mississippi Lime. The JV initially covered 11,700 net acres in central Kay County in north central Oklahoma where the Mississippian Lime formation is well-defined by previous vertical development. We own a 45% interest in the JV that is committed to drill between six and fourteen gross wells in the first 12 months. The JV is considering several bolt-on leasehold acquisitions, and has already completed one small purchase.

The JV is currently completing its first saltwater disposal well necessary to support oil production and has commenced drilling of its first Mississippian Lime oil well. Completion of both wells is expected during the quarter ending September 30, 2012. The drilling of the second Mississippian Lime oil well is expected to commence shortly thereafter using the same drilling rig.

Lopez Oil Field, South Texas The Lopez Oil Field in South Texas previously underwent secondary recovery through waterflooding and was completely abandoned in the 1990's. We acquired new leases and began testing and development to generate incremental value based on high fluid volume wells and higher oil prices. Initially, problems in re-injecting produced water at high rates limited our ability to consistently produce the field at the targeted rate. As previously reported last quarter, we believe that our new methods of disposal are effective and have allowed us to more fully test the Lopez #5, the second producing well we drilled in the Lopez Oil Field and that was completed earlier in this fiscal year. Consistent production of the Lopez #5 has resulted in stable oil rate averaging 20 BOPD in June to date compared to our targeted level of 13 BOPD. The Garcia #1, our first test producer that was drilled and completed in fiscal 2011, continues to be limited to an intermittent 5-6 BOPD rate, which we believe is largely due to its proximity to numerous old water injection wells. Following receipt of a revised permit, we expect to begin operating the Montemayor #3, our third oil well that was drilled and completed earlier this fiscal year.

We have identified approximately 35 drilling locations in the Lopez Field on our Lopez, Montemayor and adjacent leases, and we expect to continue development activities in the first half of fiscal 2013.

Artificial Lift Technology (GARP™) Two commercial demonstrations of our patented gas assisted rod pump technology ("GARP™") have been installed with sufficient production history to evaluate.

In March 2012, we installed GARP™ in the Select Lands #2, a horizontal well completed in the Georgetown Formation in Grimes County, Texas with 247,000 barrels of oil equivalent (BOE) cumulative historic production.  Prior to installation of GARP™, production from the Select Lands #2 had declined to less than 1 barrel of oil equivalent per day (BOEPD).  Following installation of GARP™, production significantly increased to an average of 20 BOEPD (100% oil to date) during the first 20 days of June. The increase is projected to have substantially added reserves in the well (see table below).

As previously announced, our first commercial GARP™ installation was completed in early December 2011 in our partner's Morgan-Kovar #1, a horizontal well completed in the Austin Chalk Formation in Fayette County, Texas. Prior to installation, production had averaged 1 barrel of oil per day (BOPD) and 10 thousand cubic feet per day (MCFD).  Excluding downtime to replace worn-out pre-existing equipment, our GARP™ installation has resulted in production of approximately 6 BOPD and 20 MCFD, an increase that is also projected to substantially add well reserves (see table below).

Summary GARP™ Results               




Formation &



Pdn Rate


Pdn Rate

Cumul. Hist. Pdn

Remaining Recovery**

MK #1

100% WI

    50% NPI

Austin Chalk

Fayette Co.

1    BOPD

10  MCFD

6        BOPD

20      MCFD

231 MBO

 677  MMCF

50+   MBO

100+  MMCF

SL #2

    99% BPO

 76.5% APO


Grimes Co.

0.1 BOPD

16-20 BOPD

153 MBO

  566 MMCF

60+   MBO

* WI = working interest, NPI = net profits interest, BPO = before payout, APO = after payout ** Gross projected recovery projected from rate-cumulative production plot

Commercial results to date indicate that our GARP™ technology has substantially extended the lives of wells that previously had declined to marginal or uneconomic production levels, while adding up to 15-30% more reserves at a relatively low cost of less than $4 per working interest BOE.

About Evolution Petroleum Evolution Petroleum Corporation develops incremental petroleum reserves and shareholder value by applying conventional and specialized technology to known onshore oil and gas resources.   Principal assets as of June 30, 2011 include 13.8 MMBOE of proved and 6.2 MMBOE of probable reserves with a PV10* of $375 million and $76 million, respectively, and no debt.  Producing assets include a CO(2)-EOR project with growing production in Louisiana's Delhi Field, the Giddings Field of Central Texas and Lopez Field in South Texas.  Other assets include a 45% interest in a joint venture that holds 11,940 net acres 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 pre-tax measure is useful for evaluating our Company.  PV-10 is not a measure of financial or operating performance under GAAP, nor is it intended to represent the 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



Estimated future net revenues





10% annual discount for estimated timing of future cash flows



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



Estimated future income tax expenses discounted at 10%



Standardized Measure





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

SOURCE Evolution Petroleum Corporation