HOUSTON, Nov. 4, 2015 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE MKT: EPM) today reported financial and operating highlights for its first quarter of fiscal 2016 ended September 30, 2015 (the "current quarter"), with comparisons to the fourth quarter ended June 30, 2015 (the "prior quarter") and the quarter ended September 30, 2014 (the "year-ago quarter").  The results for the year-ago quarter did not include the Company's reversionary working interest in the Delhi Field, which became effective November 1, 2014, so most comparisons will focus on sequential results from the prior quarter.

Highlights for the Quarter Ended September 30, 2015

  • Net income increased to $2.9 million, or $0.09 per share, for the quarter.
  • Net production increased to 1,698 net barrels of oil per day ("BOPD") from the Delhi field, a 2% increase from the prior quarter.  Gross production increased to 6,423 BOPD from 6,328 BOPD in the prior quarter.
  • Average realized oil prices were $47 per barrel, down from $59 in the prior quarter, resulting in Delhi revenues of $7.3 million, down from $9.0 million in the prior quarter.  Realized hedge gains added $0.9 million, or $5.55 per barrel, which are reported as other income and not as revenues.
  • Net working capital increased to $16.3 million from $14.4 million in the prior quarter on the strength of solid operating results, a $1.5 million refund from the carryback of stock option deductions to prior year's Louisiana state taxes paid and insurance proceeds.
  • We distributed $1.8 million of cash dividends to our common and preferred shareholders in the current quarter and returned $1.0 million of cash to shareholders with the open market repurchases of common stock.
  • Capital spending in the Delhi field was $2.6 million, primarily directed towards the NGL plant. Approximately $18.0 million remains to be expended prior to the plant's startup, which is scheduled for next summer.

Randy Keys, President and CFO, said: "Despite lower oil prices, we were able to generate very strong earnings of $0.09 per common share in the quarter.  We were aided by unrealized hedge gains of $1.1 million (an estimated $0.7 million after tax, or $0.02 per common share) and other income of $1.1 million from insurance proceeds related to the pre-reversion fluid release event (an estimated $0.7 million after tax, or $0.02 per common share.)  Without the benefit of these items, net income would have been $0.05 per common share. Our hedging program has been very beneficial in this price environment as we realized derivative gains of $0.9 million in the quarter.  Work on the Delhi NGL plant is continuing and it is scheduled to be online in the summer of 2016.  The NGL plant is expected to significantly increase liquid production volumes from the field, provide substantial volumes of methane to power field operations and enhance the efficiency and output of the CO2 flood.  Importantly, we have seen operating costs in the Delhi Field decline to $16.37 per barrel, as the operator's cost control efforts continue to show positive results.  Our strong balance sheet and working capital position of $16.3 million continue to serve us well."

Robert Herlin, Chairman and CEO, added: "Unlike the majority of our peers, we remain in excellent financial condition and posted net income and earnings per share for the quarter, above expectations, and ended the quarter free of debt.  We believe our financial strength gives us the flexibility to take advantage of opportunities that may come our way in this environment, while maintaining our cash dividend to common shareholders. Looking to the future, we are positive about the prospects for the Company, including our ability to continue our growth plan, create long-term value and return increasing amounts of cash to shareholders."

Delhi Field Operations

Financial results for the Delhi Field were positively impacted by increased production levels, which offset the lower oil prices in the current quarter.  Net production increased to 1,698 BOPD from 1,673 BOPD in the prior quarter, while average prices dropped from $59 per barrel to $47.  Our realized hedge gains added the equivalent of $5.55 per barrel to this lower oil price.  We had previously hedged 1,100 BOPD, an estimated two-thirds of our production, at a West Texas Intermediate ("WTI") average floor price of $55 per barrel for the six month period ending December 31, 2015.  In early October, the Company entered into a fixed price swap contracts for 1,100 BOPD at a WTI price of $51.45 per barrel, for the three month period ending March 31, 2016.  In addition to the WTI price on our hedged volumes, we continue to receive a market price premium for our Delhi production, which is sold as Louisiana Light Sweet ("LLS").

Field operating expenses were $16.37 per barrel of oil equivalent ("BOE"), below previous levels, resulting primarily from lower purchased CO2 costs and other operating cost savings. In the current quarter, our net share of lease operating expenses was approximately $2.6 million, of which $1.4 million was related to CO2 purchases and transportation expenses. Total CO2 costs (net) were down 22% from the prior quarter as a result of both lower oil prices and lower purchased CO2 volumes.  Our purchased CO2 costs are directly indexed to realized oil prices received at Delhi.

As of September 30, 2015, we have incurred approximately $6.6 million of cumulative capital costs for the NGL plant, out of a total estimated commitment of $24.6 million.  We expect the remaining obligation of $18.0 million will be incurred over the next nine to twelve months prior to completion, which is scheduled for the summer of 2016.  The expenditures during calendar 2015, which were estimated to be approximately $14.0 to $15.0 million, are primarily related to engineering, procurement and off-site fabrication of major components of the plant.  Installation in the field is expected to commence in the first quarter of calendar 2016.

Gas Assisted Rod Pump (GARP®) Services

During the current quarter, we completed a GARP® installation in the Eagle Ford play for a new third-party customer.  Subsequent to the end of the quarter, we completed an installation for another new customer in the Barnett Shale.  Initial results for both installations look promising. The earlier installation for a customer in the Permian Basin was recently removed due to unrelated production difficulties. Despite the challenging market environment and overall industry conditions, we are diligently working to advance the adoption of the technology and are pleased to have completed these new installations for large operators in new basins. We are also reviewing the best options for accelerating commercial development.

Liquidity and Capital Resources

At September 30, 2015, the Company had total liquidity of $21.3 million, which includes $16.3 million of working capital and $5.0 million of availability under our unsecured revolving credit facility.  As of September 30, 2015, the Company remained debt-free. We believe that current liquidity combined with expected operating cash flows will be sufficient to fund the Company's expected capital requirements for the fiscal year ended June 30, 2016 and allow us to continue our common stock dividend program.  At the present time, we do not have any committed capital spending obligations beyond the current fiscal year.

Other Matters

In late September 2015, we received a $1.5 million refund of cash taxes paid to the State of Louisiana during the three years ended June 30, 2014.  The refund of taxes resulted from the carryback of income tax losses which arose from the exercise of stock options and incentive warrants in November 2013.   For financial reporting purposes, this benefit does not affect our provision for income taxes, but is instead recorded as an increase in additional-paid-in-capital.

In mid-October, in the case of John C. McCarthy, et al versus Evolution Petroleum Corp, et al, related to our purchase of royalty interests in the Delhi Field in 2006, the Supreme Court of Louisiana overturned the appellate court and reinstated the district court's decision to dismiss the case with prejudice.

Expected Tax Treatment of Dividends

For the fiscal year ended June 30, 2015, 100% of cash dividends on preferred shares were treated as qualified dividend income.  Approximately 86% of cash dividends on common shares were treated as a return of capital to our stockholders and the remainder of 14% was treated as qualified dividend income.  Based on our current projections for the fiscal year ending June 30, 2016, we expect 100% of preferred and common dividends to be treated as qualified dividend income.

Conference Call

As previously announced, Evolution Petroleum will host a conference call on Thursday, November 5, 2015 at 11:00 a.m. Eastern (10:00 a.m. Central) to discuss results.  To access the call, please dial 1-855-327-6837 (U.S. and Canada) and 1-631-891-4304 (International). 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 12, 2015 by calling 1-877-870-5176 (U.S.) or 1-858-384-5517 (Canada and International) and providing the replay pin passcode of 116874.  The webcast will also be available on the Company's website.

About Evolution Petroleum

Evolution Petroleum Corporation develops 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.

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. 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.

Company Contact: 
Randy Keys, President and CFO 
(713) 935-0122 
rkeys@evolutionpetroleum.com 

Financial Tables to Follow

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Statements of Operations

(Unaudited)

Three Months Ended
 September 30,

2015

2014

Revenues


Delhi field

$

7,296,386

$

3,868,602

Artificial lift technology

83,020

115,856

Other properties

—

20,369

Total revenues

7,379,406

4,004,827

Operating costs


Production costs - Delhi field

2,557,887

—

Production costs - artificial lift technology

59,514

197,360

Production costs - other properties

1,046

88,022

Depreciation, depletion and amortization

1,218,273

369,350

Accretion of discount on asset retirement obligations

11,343

4,636

General and administrative expenses *

1,684,845

1,504,593

Total operating costs

5,532,908

2,163,961

Income from operations

1,846,498

1,840,866

Other


Gain on settled derivative instruments, net

866,427

—

Gain on unsettled derivative instruments, net

1,071,962

—

Delhi field insurance recovery related to pre-reversion event

1,074,957

—

Interest income

5,812

12,763

Interest (expense)

(18,460)

(18,460)

Income before income taxes

4,847,196

1,835,169

Income tax provision

1,754,969

706,159

Net income attributable to the Company

$

3,092,227

$

1,129,010

Dividends on preferred stock

168,575

168,575

Net income available to common stockholders

$

2,923,652

$

960,435

Earnings per common share


Basic

$

0.09

$

0.03

Diluted

$

0.09

$

0.03

Weighted average number of common shares


Basic

32,718,244

32,682,401

Diluted

32,774,176

32,826,250

 *  General and administrative expenses for the three months ended September 30, 2015 and 2014 included non-cash stock-based compensation expense of $218,115 and $243,337, respectively.

 

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Balance Sheets

(Unaudited)

September 30,
 2015

June 30,
 2015

Assets


Current assets


Cash and cash equivalents

$

16,317,191

$

20,118,757

Receivables

2,679,511

3,122,473

Deferred tax asset

—

82,414

Derivative assets, net

961,988

—

Prepaid expenses and other current assets

321,589

369,404

Total current assets

20,280,279

23,693,048

Oil and natural gas property and equipment, net (full-cost method of accounting)

46,605,308

45,186,886

Other property and equipment, net

252,707

276,756

Total property and equipment

46,858,015

45,463,642

Other assets

574,718

726,037

Total assets

$

67,713,012

$

69,882,727

Liabilities and Stockholders' Equity


Current liabilities


Accounts payable

$

2,659,490

$

8,173,878

Accrued liabilities and other

581,271

855,373

Derivative liabilities, net

—

109,974

Deferred income taxes

244,662

—

State and federal income taxes payable

533,736

190,032

Total current liabilities

4,019,159

9,329,257

Long term liabilities


Deferred income taxes

10,902,907

11,242,551

Asset retirement obligations

727,110

715,767

Deferred rent

—

18,575

Total liabilities

15,649,176

21,306,150

Commitments and contingencies (Note 16)


Stockholders' equity


Preferred stock, par value $0.001; 5,000,000 shares authorized:8.5% Series A Cumulative Preferred Stock, 1,000,000 shares designated, 317,319 shares issued and outstanding at September 30, 2015 and June 30, 2015 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 and outstanding 32,670,342 shares and 32,615,646 as of September 30, 2015 and June 30, 2015, respectively

32,670

32,845

Additional paid-in capital

39,040,774

36,847,289

Retained earnings

12,990,075

11,696,126

Total stockholders' equity

52,063,836

48,576,577

Total liabilities and stockholders' equity

$

67,713,012

$

69,882,727

 

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(Unaudited)

Three Months Ended
 September 30,

2015

2014

Cash flows from operating activities


Net income attributable to the Company

$

3,092,227

$

1,129,010

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


Depreciation, depletion and amortization

1,230,432

381,509

Stock-based compensation

218,115

243,337

Accretion of discount on asset retirement obligations

11,343

4,636

Settlements of asset retirement obligations

—

(226,008)

Deferred income taxes

(12,568)

124,603

Deferred rent

—

(4,286)

(Gain) on derivative instruments, net

(1,938,389)

—

Write-off of deferred loan costs

50,414

—

Changes in operating assets and liabilities:


Receivables from oil and natural gas sales

809,573

188,024

Receivables other

(51,956)

(22,458)

Prepaid expenses and other current assets

47,815

114,747

Accounts payable and accrued expenses

(1,563,847)

(1,345,875)

Income taxes payable

343,704

44,173

  Net cash provided by operating activities

2,236,863

631,412

Cash flows from investing activities


Derivative settlements received

551,772

—

Capital expenditures for oil and natural gas properties

(6,571,757)

(1,136)

Capital expenditures for other property and equipment

—

(156,798)

Other assets

(23,802)

(55,046)

  Net cash used in investing activities

(6,043,787)

(212,980)

Cash flows from financing activities


Cash dividends to preferred stockholders

(168,575)

(168,575)

Cash dividends to common stockholders

(1,629,703)

(3,279,341)

Acquisition of treasury stock

(1,175,920)

(55,452)

Tax benefits related to stock-based compensation

2,980,832

537,282

Deferred loan costs

(1,276)

(24,716)

  Net cash provided (used) in financing activities

5,358

(2,990,802)

Net decrease in cash and cash equivalents

(3,801,566)

(2,572,370)

Cash and cash equivalents, beginning of period

20,118,757

23,940,514

Cash and cash equivalents, end of period

$

16,317,191

$

21,368,144


Supplemental disclosures of cash flow information:

Three Months Ended
 September 30,

2015

2014

Louisiana carryback income tax refund and related interest received

$

1,556,999

$

—

Non-cash transactions:


Change in accounts payable used to acquire property and equipment

(4,072,935)

(31,806)

Deferred loan costs reclassified to oil and gas property cost

108,472

—

Change in accrued purchases of treasury stock

(170,283)

—

 

Supplemental Information on Oil and Natural Gas Operations (Unaudited)

Three Months Ended





September 30, 2015

June 30, 2015

Variance

Variance %

Delhi field:







Crude oil revenues

$

7,296,386

$

9,020,340

$

(1,723,954)

(19.1)%

Crude oil volumes (Bbl)

156,236

152,272

3,964

2.6%

Average price per Bbl

$

46.70

$

59.24

$

(12.54)

(21.2)%










  Delhi field production costs

$

2,557,887

$

2,765,511

$

(207,624)

(7.5)%

  Delhi field production costs per BOE

$

16.37

$

18.16

$

(1.79)

(9.9)%










Artificial lift technology:







  Crude oil revenues

$

29,427

$

40,655

$

(11,228)

(27.6)%

  NGL revenues

1,050

1,873

(823)

(43.9)%

  Natural gas revenues

704

814

(110)

(13.5)%

  Service revenue

51,839

—

51,839

—%

  Total revenues

$

83,020

$

43,342

$

39,678

91.5%










  Crude oil volumes (Bbl)

680

732

(52)

(7.1)%

  NGL volumes (Bbl)

82

107

(25)

(23.4)%

  Natural gas volumes (Mcf)

307

394

(87)

(22.1)%

  Equivalent volumes (BOE)

813

905

(92)

(10.2)%










  Crude oil price per Bbl

$

43.28

$

55.54

$

(12.26)

(22.1)%

  NGL price per Bbl

12.80

17.50

(4.70)

(26.9)%

  Natural gas price per Mcf

$

2.29

2.07

0.22

10.6%

    Equivalent price per BOE

$

38.35

$

47.89

$

(9.54)

(19.9)%










  Artificial lift production costs (a)

$

59,514

$

86,983

$

(27,469)

(31.6)%

  Artificial lift production costs per BOE

$

73.20

$

96.11

$

(22.91)

(23.8)%










Other properties:







  Revenues

$

—

$

—

$

—

—%

  Equivalent volumes (BOE)

—

—

—

—%

  Equivalent price per BOE

$

—

$

—

$

—

—%










  Production costs

$

1,046

$

(2,563)

$

3,609

(140.8)%

  Production costs per BOE

$

—

$

—

$

—

—%










Combined:







Oil and gas DD&A (b)

$

1,188,872

$

1,159,550

$

29,322

2.5%

Oil and gas DD&A per BOE

$

7.57

$

7.57

$

—

—%



(a) 

Includes workover costs of approximately $9,901 and $36,350, for the three months ended September 30 and June 30, 2015, respectively, that were primarily utilized to restore production in the Appelt #1H and Selected Lands #2 wells.

(b) 

Excludes depreciation of artificial lift technology equipment, office equipment, furniture and fixtures, and other assets of $29,401 and $30,577, for the three months ended September 30 and June 30, 2015, respectively.

 

Supplemental Information on Oil and Natural Gas Operations (Unaudited)

Three Months Ended September 30,




2015

2014

Variance

Variance %

Delhi field:






Crude oil revenues

$

7,296,386

$

3,868,602

$

3,427,784

88.6%

Crude oil volumes (Bbl)

156,236

39,094

117,142

299.6%

Average price per Bbl

$

46.70

$

98.96

$

(52.26)

(52.8)%








  Delhi field production costs

$

2,557,887

$

—

$

2,557,887

—%

  Delhi field production costs per BOE

$

16.37

$

—

$

16.37

—%








Artificial lift technology:






  Crude oil revenues

$

29,427

$

74,980

$

(45,553)

(60.8)%

  NGL revenues

1,050

22,227

(21,177)

(95.3)%

  Natural gas revenues

704

15,552

(14,848)

(95.5)%

  Service revenues

51,839

3,097

48,742

1,573.8%

  Total revenues

$

83,020

$

115,856

$

(32,836)

(28.3)%








  Crude oil volumes (Bbl)

680

772

(92)

(11.9)%

  NGL volumes (Bbl)

82

744

(662)

(89.0)%

  Natural gas volumes (Mcf)

307

4,439

(4,132)

(93.1)%

  Equivalent volumes (BOE)

813

2,256

(1,443)

(64.0)%








  Crude oil price per Bbl

$

43.28

$

97.12

$

(53.84)

(55.4)%

  NGL price per Bbl

12.80

29.88

(17.08)

(57.2)%

  Natural gas price per Mcf

$

2.29

3.50

(1.21)

(34.6)%

    Equivalent price per BOE

$

38.35

$

49.98

$

(11.63)

(23.3)%








  Artificial lift production costs (a)

$

59,514

$

197,360

$

(137,846)

(69.8)%

  Artificial lift production costs per BOE

$

73.20

$

87.48

$

(14.28)

(16.3)%








Other properties:






  Revenues

$

—

$

20,369

$

(20,369)

(100.0)%

  Equivalent volumes (BOE)

—

285

(285)

(100.0)%

  Equivalent price per BOE

$

—

$

71.47

$

(71.47)

(100.0)%








  Production costs

$

1,046

$

88,022

$

(86,976)

(98.8)%

  Production costs per BOE

$

—

$

308.85

$

(308.85)

(100.0)%








Combined:






Oil and gas DD&A (b)

$

1,188,872

$

260,160

$

928,712

357.0%

Oil and gas DD&A per BOE

$

7.57

$

6.25

$

1.32

21.1%


(a) 

Includes workover costs of approximately $9,901 and $149,000, for the three months ended September 30, 2015 and 2014, respectively, that were primarily utilized to restore production in the Appelt #1H and Selected Lands #2 wells.

(b) 

Excludes depreciation of artificial lift technology equipment, office equipment, furniture and fixtures, and other assets of $29,401 and $109,190, for the three months ended September 30, 2015 and 2014, respectively.

 

 

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SOURCE Evolution Petroleum Corporation