HOUSTON, TX / ACCESSWIRE / November 7, 2016 / Evolution Petroleum Corporation (NYSE MKT: EPM) announced today that its Board of Directors increased the quarterly cash dividend to common shareholders by 30%, to $0.065 per share, a rate of $0.26 per share on an annualized basis. The quarterly dividend will be payable on December 30, 2016 to shareholders of record as of the close of business on December 15, 2016.

EPM also reported financial and operating highlights for its fiscal first quarter ended September 30, 2016, with comparisons to the fiscal fourth quarter ended June 30, 2016 (the "prior quarter") and the quarter ended September 30, 2015 (the "year-ago quarter").

Highlights:

  • We reported net income of $1.8 million in the current quarter. Our net income to common shareholders was $0.6 million, or $0.02 per share, which includes a nonrecurring, noncash deemed dividend of $1.0 million related to the redemption of our preferred stock and $0.3 million of final dividends on the preferred stock, or $0.04 per share in the aggregate.
  • We paid our twelfth consecutive quarterly cash dividend on common shares and announced a 30% increase in the dividend for the next quarter.
  • Gross production in the Delhi field increased 5.8% over the prior quarter, to 7,371 barrels of oil equivalent per day ("BOEPD") from 6,964 BOEPD, primarily from conformance and production enhancement operations. This production does not yet include expected volumes from the new Delhi NGL plant, which is scheduled for completion and start-up by the end of the calendar year.
  • Our net production increased to 1,935 BOEPD after a small 0.2% (.002) adjustment to our net revenue interest from the June 2016 litigation settlement. Our average realized price per equivalent barrel was $42.66, down slightly from the $42.87 average price in the prior quarter.
  • We announced the redemption of all of our 8.5% Series A Cumulative Preferred Stock. Annual preferred dividend savings will amount to $674,302 per year, or $0.02 per common share.
  • We ended the quarter with $19.6 million of working capital, substantially all of which was cash, after reduction for the $7.9 million commitment to retire our preferred stock. We remain debt free.

Randy Keys, President and CEO, said: "The decisions to redeem our preferred stock and increase the common stock dividend reflect our consistent focus on delivering value to our common shareholders. Our balance sheet strength, with almost $20 million of net cash, combined with the end of the capital spending on the NGL plant, the anticipated increase in field cash flow and the outstanding performance of the Delhi field, gives us the confidence to increase the dividend at this time. The Board of Directors plans to again review the dividend in 2017 based on results from the NGL plant start-up and the future outlook for crude oil prices. We ended the past fiscal year with our best financial position since this industry downturn began two years ago, and our financial position and outlook have only improved during the quarter."

Results for the Quarter Ended September 30, 2016

The Delhi field continued to perform very well during the quarter, with gross production up by over 400 BOEPD from the prior quarter to 7,371 BOEPD. This production growth resulted from work to improve the performance of the CO2 flood through selective conformance efforts and other relatively low cost production enhancement projects. This increasing production trend is a very favorable indicator for the long-term reserve recovery from the Delhi field.

In the current quarter, we reported operating revenues of $7.6 million, based on an average realized oil price of $42.66 per barrel, and generated $2.7 million in income from operations. In the prior quarter, we reported $1.0 million in income from operations on revenues of $7.2 million, which was based on an average oil price of $42.87 per barrel. Production volumes increased to 1,935 BOEPD from 1,856 BOEPD in the prior quarter and were substantially above the year-ago quarter rate of 1,745 BOEPD. Quarterly net income to common shareholders was $0.6 million, or $0.02 per diluted share, which includes a nonrecurring, noncash deemed dividend of $1.0 million related to the redemption of our preferred stock and $0.3 million of final dividends on the preferred stock, or $0.04 per share in the aggregate. On a pro forma basis, assuming the redemption of the preferred stock had occurred prior to the current quarter, our net income to common shareholders would have been $1.8 million, or $0.06 per share.

Production costs in the Delhi field increased 15.4% from $2.0 million in the prior quarter to $2.3 million in the current quarter, primarily as a result of higher volumes of purchased CO2. Total CO2 injection volumes increased during the summer, with a corresponding increase in purchased volumes. Our cost of purchased CO2 is tied directly to realized oil prices in the field, so our cost per Mcf was largely unchanged from quarter to quarter.

Depletion, depreciation and amortization expense increased slightly to $1.3 million from $1.2 million in the prior quarter on increased production and sales volumes. The DD&A rate per barrel did not change significantly for these periods.

Our general and administrative expenses were $1.2 million for the quarter, of which $0.3 million were stock-based compensation expenses and approximately $0.9 million were cash costs. These amounts represent a substantial decrease over the prior quarter and year-ago quarter, and are in line with our expectations for lower G&A costs after the litigation settlement and the separation of our artificial lift technology operations in late 2015. The Company has always maintained a consistent focus on cost control, but we have made significant cost reductions over the past three years as we have streamlined and focused the organization during this downturn.

Delhi Capital Spending

Construction of the Delhi natural gas liquids ("NGLs") recovery plant was completed in late October, and startup testing is scheduled to begin this month. We expect the NGL plant to deliver significant production growth from new NGL volumes in the field shortly after the end of the year. In addition, with an expected improvement in efficiency of the CO2 flood from removal of methane and NGLs from the CO2 recycle stream, we are also expecting an increase in yearly crude oil production. As of September 30, 2016, we had incurred $23.9 million of costs on the NGL plant out of an original budget of approximately $25 million net to the Company. The completed cost of the project is expected to be largely within the original budget.

In late September and October, we approved eleven small capital workover projects for continuing conformance operations in the Delhi field, totaling approximately $3.8 million ($0.9 million net to us). There are three workover rigs operating in the field and we expect all of these operations to be completed by the end of the year. These new projects result from the demonstrated benefits from previous conformance efforts and the significant returns that have been realized from relatively modest capital investments in the field. These conformance projects add production and cash flow in a very short time frame after investment.

Liquidity and Capital Resources

Our liquidity position remains excellent, with $19.6 million of net working capital (after accrual of $7.9 million for the redemption of preferred stock), $10.0 million of undrawn liquidity under our reserve-based credit facility and the expectation of significant free cash flow over the next twelve months. Our future cash flow is dependent on the prices we receive for our production. Based on our solid financial position, we expect to continue our quarterly common stock cash dividend program for the foreseeable future.

Southwest IDEAS Investor Conference

Evolution also announces that Randy Keys, President and CEO of Evolution, will present at the Southwest IDEAS Investor Conference on Wednesday, November 16, 2016 at the InterContinental Hotel in Dallas, Texas. The Company's presentation is scheduled to begin at 8:40 a.m. Central (9:40 a.m. Eastern). 

The presentation will be webcast live and may be accessed at the conference website, www.threepartadvisors.com/southwest-ideas. It will also be available on the Company's website, www.evolutionpetroleum.com.

Conference Call

As previously announced, Evolution Petroleum will host a conference call on Tuesday, November 8, 2016 at 11:00 a.m. Eastern (10:00 a.m. Central) to discuss results. To access the call, please dial 1-855-327-6837 (US and Canada) or 1-631-891-4304 (International). To listen live or hear a rebroadcast, please go to http://www.EvolutionPetroleum.com. A replay will be available two hours after the end of the conference call through November 15, 2016 by calling 1-844-512-2921 (US and Canada) or 1-412-317-6671 (International) and providing the replay pin number of 10001875.

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. Our principal asset is our interest in a CO2 enhanced oil recovery project in Louisiana's Delhi Field. Additional information, including the Company's most recent 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 forward-looking statements contained in this press release regarding potential results and future plans and objectives of the Company involve a wide range risks and uncertainties. Statements herein using words such as "believe," "expect," "plans" and words of similar meaning are forward-looking statements. Although our expectations are based on engineering, geological, financial and operating assumptions that we believe to be reasonable, many factors could cause actual results to differ materially from our expectations and we can give no assurance that our goals will be achieved. These factors and others are detailed under the heading "Risk Factors" and elsewhere in our periodic documents filed with the SEC. The Company undertakes no obligation to update any forward-looking statement.

Company Contact:

Randy Keys, President & CEO
(713) 935-0122
rkeys@evolutionpetroleum.com 

Evolution Petroleum Corporation and Subsidiaries
Consolidated Condensed Statements of Operations
(Unaudited)
   
Three Months Ended
 
   
September 30,
   
June 30,
 
   
2016
   
2015
   
2016
 
Revenues
                 
Crude oil
  $ 7,593,855     $ 7,325,813     $ 7,233,190  
Natural gas liquids
    89       1,050       5,553  
Natural gas
    (4 )     704       1,691  
Artificial lift technology services
    -       51,839       -  
Total revenues
    7,593,940       7,379,406       7,240,434  
Operating costs
                       
Production costs
    2,344,641       2,608,579       2,031,642  
Cost of artificial lift technology services
    -       9,868       -  
Depreciation, depletion and amortization
    1,273,439       1,218,273       1,206,476  
Accretion of discount on asset retirement obligations
    13,224       11,343       14,499  
General and administrative expenses *
    1,235,043       1,684,845       3,032,994  
Total operating costs
    4,866,347       5,532,908       6,285,611  
Income from operations
    2,727,593       1,846,498       954,823  
Other
                       
Gain on realized derivative instruments, net
    90       866,427       (644,936 )
Gain (loss) on unrealized derivative instruments, net
    (14,132 )     1,071,962       4,427  
Delhi field litigation settlement
    -       -
    28,096,500  
Delhi field insurance recovery related to pre-reversion event
    -       1,074,957       -  
Interest and other income
    12,745       5,812       2,695  
Interest expense
    (20,345 )     (18,460 )     (19,781 )
Income before income taxes
    2,705,951       4,847,196       28,393,728  
Income tax provision
    889,176       1,754,969       7,519,258  
Net income attributable to the Company
    1,816,775       3,092,227       20,874,470  
Dividends on preferred stock
    250,990       168,575       168,576  
Deemed dividend on preferred shares called for redemption
    1,002,440       -       -  
Net income available to common stockholders
  $ 563,345     $ 2,923,652     $ 20,705,894  
Earnings per common share
                       
Basic
  $ 0.02     $ 0.09     $ 0.63  
Diluted
  $ 0.02     $ 0.09     $ 0.63  
Weighted average number of common shares
                       
Basic
    32,957,010       32,718,244       32,904,481  
Diluted
    33,007,599       32,774,176       32,964,109  

* General and administrative expenses for the three months ended September 30, 2016, September 30, 2015 and June 30, 2016 included non-cash stock-based compensation expenses of $311,688, $218,115 and $1,041,463, respectively. These quarters also respectively included $28,129, $306,357 and $646,931 of litigation expenses.

 Evolution Petroleum Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Unaudited) 

   
September 30,
2016
   
June 30,
2016
 
Assets
           
Current assets
           
Cash and cash equivalents
  $ 28,236,711     $ 34,077,060  
Receivables
    2,518,470       2,638,188  
Deferred tax asset
    -       105,321  
Derivative assets, net
    -       14,132  
Prepaid expenses and other current assets
    273,114       251,749  
Total current assets
    31,028,295       37,086,450  
Oil and natural gas property and equipment, net (full-cost method of accounting)
    61,451,021       59,970,463  
Other property and equipment, net
    50,585       28,649  
Total property and equipment
    61,501,606       59,999,112  
Other assets
    348,014       365,489  
Total assets
  $ 92,877,915     $ 97,451,051  
Liabilities and Stockholders' Equity
               
Current liabilities
               
Accounts payable
  $ 2,509,041     $ 5,809,107  
Preferred shares called for redemption
    7,932,975       -  
Accrued liabilities and other
    839,313       2,097,951  
State and federal income taxes payable
    97,078       621,850  
Total current liabilities
    11,378,407       8,528,908  
Long term liabilities
               
Deferred income taxes
    12,444,045       11,840,693  
Asset retirement obligations
    772,175       760,300  
Total liabilities
    24,594,627       21,129,901  
Commitments and contingencies (Note 15)
               
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, 2016 and June 30, 2016; with a liquidation preference of $7,932,975; called for redemption at September 30, 2016 (Note 8)
    -       317  
Common stock; par value $0.001; 100,000,000 shares authorized: issued and outstanding 33,045,515 shares and 32,907,863 as of September 30, 2016 and June 30, 2016, respectively
    33,045       32,907  
Additional paid-in capital
    40,222,825       47,171,563  
Retained earnings
    28,027,418       29,116,363  
Total stockholders' equity
    68,283,288       76,321,150  
Total liabilities and stockholders' equity
  $ 92,877,915     $ 97,451,051  

 

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

 

   
Three Months Ended
September 30,
 
   
2016
   
2015
 
Cash flows from operating activities
           
Net income attributable to the Company
  $ 1,816,775     $ 3,092,227  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation, depletion and amortization
    1,287,523       1,230,432  
Stock-based compensation
    311,688       218,115  
Accretion of discount on asset retirement obligations
    13,224       11,343  
Settlements of asset retirement obligations
    (15,899 )     -  
Deferred income taxes
    708,673       (12,568 )
(Gain) loss on derivative instruments, net
    14,042       (1,938,389 )
Write-off of deferred loan costs
    -       50,414  
Changes in operating assets and liabilities:
               
Receivables
    119,808       757,617  
Prepaid expenses and other current assets
    (21,365 )     47,815  
Accounts payable and accrued expenses
    (2,235,240 )     (1,563,847 )
Income taxes payable
    (524,772 )     343,704  
Net cash provided by operating activities
    1,474,457       2,236,863  
Cash flows from investing activities
               
Derivative settlement payments (paid) received
    (318,708 )     551,772  
Capital expenditures for oil and natural gas properties
    (4,818,816 )     (6,571,757 )
Capital expenditures for other property and equipment
    (26,347 )     -  
Other assets
    -       (23,802 )
Net cash used in investing activities
    (5,163,871       (6,043,787 )
Cash flows from financing activities
               
Cash dividends to preferred stockholders
    (168,575 )     (168,575 )
Cash dividends to common stockholders
    (1,652,290 )     (1,629,703 )
Common share repurchases, including shares surrendered for tax withholding
    (330,070 )     (1,175,920 )
Tax benefits related to stock-based compensation
    -       2,980,832  
Other
    -       (1,276 )
Net cash (used) provided by financing activities
    (2,150,935 )     5,358  
Net decrease in cash and cash equivalents
    (5,840,349 )     (3,801,566 )
Cash and cash equivalents, beginning of period
    34,077,060       20,118,757  
Cash and cash equivalents, end of period
  $ 28,236,711     $ 16,317,191  

 

Supplemental disclosures of cash flow information:
 
Three Months Ended
September 30,
 
   
2016
   
2015
 
Income taxes paid
  $ 787,366     $ -  
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
    (2,030,485 )     (4,072,935 )
Accrued redemption of called preferred shares
    7,932,975       -  
Accrued preferred dividends through redemption date
    82,415       -  
Deferred loan costs charged to oil and gas property costs
    -       108,472  
Settlement of accrued treasury stock purchases
    -       (170,283 )

Supplemental Information on Oil and Natural Gas Operations (Unaudited)

   
Three Months Ended September 30,
           
   
2016
   
2015
   
Variance
   
Variance %
Oil and gas production:
                     
Crude oil revenues
  $ 7,593,855     $ 7,325,813     $ 268,042       3.7 %
NGL revenues
    89       1,050       (961 )  
n.m.
Natural gas revenues
    (4 )     704       (708 )  
n.m.
Total revenues
  $ 7,593,940     $ 7,327,567     $ 266,373       3.6 %
                                 
Crude oil volumes (Bbl)
    178,002       156,916       21,086       13.4 %
NGL volumes (Bbl)
    4       82       (78 )  
n.m.
Natural gas volumes (Mcf)
    16       307       (291 )  
n.m.
Equivalent volumes (BOE)
    178,009       157,049       20,960       13.3 %
                                 
Equivalent volumes per day (BOE/D)
    1,935       1,745       190       10.9 %
                                 
Crude oil price per Bbl
  $ 42.66     $ 46.69     $ (4.03 )     (8.6 )%
NGL price per Bbl
    22.25       12.80       9.45       73.8 %
Natural gas price per Mcf
    (0.25 )     2.29       (2.54 )     n. m. 
Equivalent price per BOE
  $ 42.66     $ 46.66     $ (4.00 )     (8.6 )%
                                 
CO2 costs
  $ 1,078,133     $ 1,388,926     $ (310,793 )     (22.4 )%
All other lease operating expense
    1,266,508       1,219,653       46,855       3.8 %
Production costs
  $ 2,344,641     $ 2,608,579     $ (263,938 )     (10.1 )%
Production costs per BOE
  $ 13.17     $ 16.61     $ (3.44 )     (20.7 )%
                                 
CO2 volumes mcf per day, gross
    73,747       89,705       (15,958 )     (17.8 )%
                                 
Oil and gas DD&A (a)
  $ 1,265,637     1,188,872      $ 76,765       6.5 %
Oil and gas DD&A per BOE
  $ 7.11     $ 7.57      $ (0.46 )     (6.1 )%
                                 
Artificial lift technology services:
                               
Services revenues
  $ -     $ 51,839     $ (51,839 )  
n.m.
Cost of service
    -       9,868       (9,868 )  
n.m.
Depreciation and amortization expense
  $ -     $ 25,384     $ (25,384 )  
n.m.
                                 
n.m. Not meaningful.
(a) Excludes depreciation and amortization expense for artificial lift technology services and $7,802 and $4,017 of other depreciation and amortization expense for the three months ended September 30, 2016 and 2015, respectively.


Supplemental Information on Oil and Natural Gas Operations (Unaudited)

   
Three Months Ended
           
   
Sept. 30, 2016
   
June 30, 2016
   
Variance
   
Variance %
Oil and gas production:
                     
Crude oil revenues
  $ 7,593,855     $ 7,233,190     $ 360,665       5.0 %
NGL revenues
    89       5,553       (5,464 )  
n.m.
Natural gas revenues
 
(4 )  
1,691    
(1,695 )  
n.m.
Total revenues
  $ 7,593,940     $ 7,240,434     $ 353,506       4.9 %
                                 
Crude oil volumes (Bbl)
    178,002       168,397       9,605       5.7 %
NGL volumes (Bbl)
    4       320       (316 )  
n.m.
Natural gas volumes (Mcf)
    16       986       (970 )  
n.m.
Equivalent volumes (BOE)
    178,009       168,881       9,128       5.4 %
                                 
Equivalent volumes per day (BOE/D)
    1,935       1,856       79       4.3 %
                                 
Crude oil price per Bbl
  $ 42.66     $ 42.95     $ (0.29 )     (0.7 )%
NGL price per Bbl
    22.25       17.35       4.90    
n.m.
Natural gas price per Mcf
    (0.25 )     1.72       (1.97 )  
n.m.
Equivalent price per BOE
  $ 42.66       42.87     $ (0.21 )     (0.5 )%
                                 
CO2 costs
  $ 1,078,133     $ 852,862     $ 225,271       26.4 %
All other lease operating expense
    1,266,508       1,178,780       87,728       7.4 %
Production costs
  $ 2,344,641     $ 2,031,642     $ 312,999       15.4 %
Production costs per BOE
  $ 13.17     $ 12.03     $ 1.14       9.5 %
                                 
CO2 volumes mcf per day, gross
    73,747       58,727       15,020       25.6 %
                                 
Oil and gas DD&A (a)
   $ 1,265,637      $ 1,200,737      $ 64,900       5.4 %
Oil and gas DD&A per BOE
   $ 7.11      $ 7.11      $ -       - %
n.m. Not meaningful.
(a) Excludes non-operating depreciation and amortization of $7,802 and $5,739 for the three months ended September 30, 2016 and June 30, 2016, respectively.


SOURCE:
Evolution Petroleum Corporation