- Revenues Increased 58% Over Prior Year HOUSTON, Feb. 17
/PRNewswire-FirstCall/ -- Evolution Petroleum Corporation (NYSE
Euronext: EPM) today reported financial and operating results for
the three month period ended December 31, 2008, the Company's
second quarter of fiscal 2009 ("Q2-09"). Oil and gas revenues for
Q2-09 increased 58% to $1.0 million from $652,600 for the three
months ended December 31, 2007 ("Q2-08"). The increase in quarterly
revenues was due to a 228% increase in sales volumes, partially
offset by a 52% decline in blended oil and gas prices. The
substantial increase in sales volumes for Q2-09 was the result of
drilling operations in the Giddings Field in central Texas, which
generated 100% of Q2-09 revenues, compared to a contribution of 15%
of the revenues in Q2-08. The properties that comprised the
remaining 85% of Q2-08 revenues were sold in March 2008.
Sequentially, revenues for Q2-09 were 65% less than Q1-09 due to a
53% decrease in realized commodity prices and normal production
declines. For the six months of fiscal 2009, net cash provided by
operating activities was $6.4 million, partly due to the collection
of $3.6 million in recoverable income taxes from a prior year loss
carry-back, compared to $1.3 million used in the first six months
of fiscal 2008. Cash flow provided before changes in operating
assets and liabilities ("Adjusted Cash provided or used", a
non-GAAP measure reconciled below), was $1.2 million for the first
six months of fiscal 2009, a substantial improvement over the $0.3
million of Adjusted Cash used during the first six months of fiscal
2008. At December 31, 2008, working capital was $7.6 million,
compared to $13.6 million at June 30, 2008. The decrease was mostly
due to $6.8 million of capital expenditures used for oil and
natural gas properties, or more than half of fiscal 2009 planned
expenditures. Approximately $0.9 million was used to repurchase the
Company's common stock. Throughout both periods, the Company
remained debt free. Net loss in Q2-09 was $1.0 million, or $(0.04)
per diluted share, compared to a net loss of $770,900, or $(0.03)
per share during Q2-08. Results for Q2-09 included $1.1 million of
non-cash charges related to stock based compensation, depreciation,
depletion, amortization and accretion on asset retirement
obligations, compared to $0.6 million of comparable non-cash
charges in Q2-08. Robert Herlin, President and Chief Executive
Officer, commented, "Our increased production and revenue were
driven by the success we achieved in our fiscal 2008 Giddings Field
drilling program and does not reflect any fiscal 2009 drilling
activity. Total gross production from the six wells we drilled and
two wells added to production through workovers earlier in calendar
2008 has stabilized at about 240 gross barrels of oil equivalent
("BOE") per day and is generating solid cash flow for the company.
We just completed two horizontal re-entries in the Giddings Field
that in January yielded initial production rates in excess of our
expectations and a combined eight day average gross rate of about
900 BOE per day. We own 100% of the working interest in these
wells, with about an 80% net revenue interest. "For the balance of
2009, we will emphasize the addition of proved reserves and
increasing underlying value per share, instead of converting proved
undeveloped reserves ("PUD") to producing wells at a time when
commodity prices are depressed," continued Herlin. "Our current
objective is to begin converting our non-proved reserves in
Oklahoma to proved reserves through the initial drilling of our
unproved shallow Woodford Shale acreage with up to five vertical
wells. Subject to oil price, we expect to also initiate development
in our Neptune oil project in South Texas with up to three wells,
also potentially adding to our proved reserves. We are budgeting
about $1.5 million for these eight wells. As a result, our capital
expenditures will be far less during the second half of our fiscal
year. At Delhi, field development and CO2 injection plans by the
operator, Denbury Resources, remain on track with first production
response expected by late calendar 2009 or shortly thereafter. We
expect to generate net cash flows immediately with first production
through our 7.4% royalty interest, and those revenues will grow as
the project expands through its phases. "Due to our working
capital, debt-free balance sheet and current cash flows, we have no
need to raise capital through dilution of our shareholders or incur
expensive debt in the foreseeable future. Additionally, we have
operating control over our major projects in Texas and Oklahoma, no
material near-term expiring leases, and the ability to pursue
lower-cost projects that have the potential to add significant
value. As a result, we have the financial flexibility to continue
adding proved reserves while our Delhi project ramps-up cash
flows," added Herlin. Production Volumes and Prices: Net production
volumes for Q2-09 were 15,028 barrels of oil ("BO") and natural gas
liquids ("NGL") and 66.9 MMCF for a total of 26,183 BOE. This is an
increase of 250% over production volumes of 6,869 BO and NGL and
3.6 MMCF of gas, or 7.5 BOE in Q2-08. The average price of oil fell
35% to $57.37 per barrel in Q2-09 from $87.75 per barrel in Q2-08,
while the average price of NGLs fell 44% in Q2-09 to $30.63 per
barrel from $54.88 per barrel in Q2-08. The average price of
natural gas fell 10% to $5.82 per Mcf in Q2-09 versus $6.49 per Mcf
in Q2-08. On a BOE basis, the blended effective price declined 52%
to $39.78 in Q2-09 from $82.43 in Q2-08. Costs and Expenses Lease
operating expenses per BOE for Q2-09 declined 72% over Q2-08 to
$12.54, due to a much lower unit lifting costs in the Giddings
Field as compared to the divested Tullos Field. Depreciation,
Depletion & Amortization Expense ("DD&A") increased to
$504,291 or $19.07 per BOE for Q2-09, from $123,116 or $13.29 per
BOE in Q2-08. The increase was primarily due to a higher depletion
rate per BOE on higher sales volumes in the current period. The
increased depletion rate is a result of the higher development cost
of PUDs in the Giddings Field that we added in replacement of our
lower cost proved developed producing reserves ("PDPs") from our
properties in the Tullos Field Area, which we sold in March 2008.
General and administrative ("G&A") expenses increased 13% to
$1.7 million for Q2-09, as compared to $1.5 million for Q2-08. The
majority of the increase was attributable to higher overall
compensation expense for estimated bonuses and staff additions,
including non-cash stock based compensation. Staff additions
associated with a build-up of infrastructure were needed to execute
our drilling program in the Giddings Field. Non-cash stock based
compensation expense was $584,525 (35% of total G&A) and
$441,564 (30% of total G&A) for Q2-09 and Q2-08, respectively.
Other Income and Expense Q2-09 interest income decreased to
$17,782, as compared to interest income of $266,740 for Q2-08. The
decrease was due to lower available cash balances averaging $8.9
million during Q2-09 compared to $23.2 million in Q2-08, combined
with a lower interest rate environment in Q2-09. The lower cash
balance is mostly the result of cash used for drilling and
leasehold capital expenditures. Conference Call Evolution Petroleum
will host a conference call to discuss its fiscal second quarter
2009 results on Tuesday, February 17, 2009, at 11:00 a.m. Eastern
Time (10:00 a.m. Central). To access the call, please dial
303-262-2143 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,
http://www.evolutionpetroleum.com/, where it will also be archived
for replay. A telephonic replay of the conference call will be
available until February 24, 2009 and may be accessed by calling
(303) 590-3000 and using the pass code 11126478#. For more
information, please contact Donna Washburn at DRG&E at (713)
529-6000 or email at . 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. With no debt and a strong balance
sheet, the Company is well positioned to carry out its initiatives
in Enhanced Oil Recovery, Bypassed Resources and Unconventional Gas
Development. Principal assets as of July 1, 2008 include 4 MMBOE of
proved and 3.1 MMBOE of probable reserves in the Giddings Field of
central Texas, approximately 13 MMBO of probable reserves
associated with the 13,636 acre Delhi Field Holt Bryant Unit
currently being redeveloped with CO2-EOR technology in northeast
Louisiana, and leases covering approximately 18,000 net acres in
two Woodford gas shale projects in Oklahoma. The Company is also
actively engaged in developing new projects within its initiatives.
Additional information, including the Company's annual report on
Form 10-KSB and its quarterly reports on Form 10-Q can be accessed
on its website at http://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, 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.
Reconciliation of cash provided by (used in) operating activities
to Adjusted Cash, a non-GAAP measure, for the six months ended
December 31, 2008 and 2007 is as follows: 2008 2007 Cash provided
by (used in) operations $6,404,724 $(1,322,477) Exclude changes in
operating assets and liabilities: Receivables from oil and natural
gas sales (1,658,525) 176,593 Receivables from income taxes and
other (4,031,914) 811,595 Prepaid expenses and other current assets
(113,942) (85,261) Accounts payable and accrued expenses 314,436
102,658 Royalties payable 282,051 (9,767) Adjusted Cash provided by
(used in) operations $1,196,830 $(326,659) Company Contact:
Sterling McDonald, VP & CFO (713) 935-0122 Lisa Elliott / Jack
Lascar / DRG&E / 713-529-6600 - - - Tables to Follow -
Evolution Petroleum Corporation and Subsidiaries Consolidated
Statements of Operations (unaudited) Three Months Ended Six Months
Ended December 31, December 31, 2008 2007 2008 2007 Revenues Crude
oil $407,194 $607,877 $1,986,264 $1,110,150 Natural gas liquids
235,293 21,294 990,738 21,294 Natural gas 389,295 23,478 969,766
23,478 Total revenues 1,031,782 652,649 3,946,768 1,154,922
Operating Costs Lease operating expense 313,406 361,192 649,310
671,502 Production taxes 21,776 15,808 107,772 33,364 Depreciation,
depletion 504,291 123,116 1,149,173 233,559 and amortization
Accretion of asset 6,124 4,851 11,861 9,546 retirement obligations
General and administrative * 1,662,627 1,467,678 3,127,467
2,795,996 Total operating costs 2,508,224 1,972,645 5,045,583
3,743,967 Loss from operations (1,476,442) (1,319,996) (1,098,815)
(2,589,045) Other income Interest income 17,782 266,740 91,428
607,821 Net loss before income tax benefit (1,458,660) (1,053,256)
(1,007,387) (1,981,224) Income tax benefit (454,889) (282,399)
(152,053) (568,986) Net loss $(1,003,771) $(770,857) $(855,334)
$(1,412,238) Loss per common share Basic and Diluted $(0.04)
$(0.03) $(0.03) $(0.05) Weighted average number of common shares
Basic and Diluted 26,351,277 26,777,366 26,598,473 26,776,800
*General and administrative expenses for the three month period
ended December 31, 2008 and 2007 included non cash stock-based
compensation expense of $584,525 and $441,564, respectively.
General and administrative expenses for the six month period ended
December 31, 2008 and 2007 included non cash stock-based
compensation expense of $1,108,250 and $817,571, respectively.
Evolution Petroleum Corporation and Subsidiaries Consolidated
Balance Sheets (Unaudited) December 31, June 30, 2008 2008 Assets
Current assets Cash and cash equivalents $8,514,708 $11,272,280
Certificates of deposit 1,500,000 - Receivables Oil and natural gas
sales 407,775 2,066,300 Income tax - 478,599 Other 159,638 86,966
Income taxes recoverable - 3,625,987 Prepaid expenses and other
current assets 156,996 270,938 Total current assets 10,739,117
17,801,070 Property and equipment, net of depreciation, depletion,
and amortization Oil and natural gas properties - full cost method
of accounting, of which $9,598,744 at December 31, 2008 and
$7,573,507 at June 30, 2008 were excluded from amortization)
27,496,976 22,047,233 Other property and equipment 168,011 161,027
Total property and equipment 27,664,987 22,208,260 Other assets,
net 353,400 356,518 Total assets $38,757,504 $40,365,848
Liabilities and Stockholders' Equity Current liabilities Accounts
payable $2,374,360 $2,892,459 Accrued expenses 555,130 805,262
Royalties payable 191,276 473,327 Total current liabilities
3,120,766 4,171,048 Long term liabilities Deferred income taxes
2,682,921 2,901,929 Asset retirement obligations 334,668 215,056
Deferred rent 75,969 74,081 Total liabilities 6,214,324 7,362,114
Commitments and contingencies Stockholders' equity Common Stock;
par value $0.001; 100,000,000 shares authorized; issued 27,007,234
shares; outstanding 26,219,034 and 26,870,439 as of December 31,
2008 and June 30, 2008, respectively. 27,007 26,870 Additional
paid-in capital 15,465,506 14,188,841 Retained earnings 17,932,689
18,788,023 33,425,202 33,003,734 Less cost of common stock in
treasury, 788,200 shares as of December 31, 2008. (882,022) - Total
stockholders' equity 32,543,180 33,003,734 Total liabilities and
stockholders' equity $38,757,504 $40,365,848 Evolution Petroleum
Corporation and Subsidiaries Consolidated Statements of Cash Flow
(Unaudited) Six Months Ended December 31, 2008 2007 Cash flows from
operating activities Net loss $(855,334) $(1,412,238) Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities: Depreciation, depletion and amortization 1,149,173
233,559 Stock-based compensation 1,108,250 817,571 Accretion of
asset retirement obligations 11,861 9,546 Deferred income taxes
(219,008) - Deferred rent 1,888 24,903 Changes in operating assets
and liabilities: Receivables from oil and natural gas sales
1,658,525 (176,593) Receivables from income taxes and other
4,031,914 (811,595) Prepaid expenses and other current assets
113,942 85,261 Accounts payable and accrued expenses (314,436)
(102,658) Royalties payable (282,051) 9,767 Net cash provided by
(used in) operating activities 6,404,724 (1,322,477) Cash flows
from investing activities Development of oil and natural gas
properties (4,723,006) (529,262) Acquisitions of oil and natural
gas properties (2,033,874) (4,395,050) Proceeds from asset sale -
31,582 Capital expenditures for other equipment (26,602) (53,625)
Purchases of certificates of deposit (1,500,000) - Other assets
3,118 (2,020) Net cash used in investing activities (8,280,364)
(4,948,375) Cash flows from financing activities Proceeds from
issuance of restricted stock 90 26 Purchase of treasury stock
(882,022) - Net cash provided by (used in) financing activities
(881,932) 26 Net decrease in cash and cash equivalents (2,757,572)
(6,270,826) Cash and cash equivalents, beginning of period
11,272,280 27,746,942 Cash and cash equivalents, end of period
$8,514,708 $21,476,116 Supplemental disclosure of cash flow
information: Income taxes paid $15,000 $- Income tax refunds and
net operating loss carry-back received $4,052,631 $- Non-cash
transactions: Increase (decrease) in accounts payable used to
acquire oil and natural gas leasehold interests and develop oil and
natural gas properties. $(285,333) $985,571 Oil and natural gas
properties incurred through recognition of asset retirement
obligations. $107,751 $- Common stock issued in lieu of a portion
of 2008 cash bonus accrued at June 30, 2008. $168,462 $- Evolution
Petroleum Corporation and Subsidiaries Condensed Operating Data
(Unaudited) Three Months Ended Six Months Ended December 31
December 31 2008 2007 2008 2007 Production Volumes, net to the
Company: Crude oil (Bbl) 7,346 6,481 20,055 13,841 Natural gas
liquids ("NGLs") (Bbl) 7,682 388 18,745 388 Natural gas (Mcf)
66,929 3,617 128,075 3,617 Crude oil, NGLs and natural gas (BOE)
26,183 7,472 60,146 14,832 Sales Volumes, net to the Company: Crude
oil (Bbl) 7,098 6,927 19,933 13,961 NGLs (Bbl) 7,682 388 18,745 388
Natural gas (Mcf) 66,929 3,617 128,075 3,617 Crude oil, NGLs and
natural gas (BOE) 25,935 7,918 60,024 14,952 Revenue data: Crude
oil $407,194 $607,877 $1,986,264 $1,110,150 NGLs 235,293 21,294
990,738 21,294 Natural gas 389,295 23,478 969,766 23,478 Total
revenues $1,031,782 $652,649 $3,946,768 $1,154,922 Average price:
Crude oil (per Bbl) $57.37 $87.75 $99.65 $79.52 NGLs (per Bbl)
30.63 54.88 52.85 54.88 Natural gas (per Mcf) 5.82 6.49 7.57 6.49
Crude oil, NGLs and natural gas (per BOE) $39.78 $82.43 $65.75
$77.24 Expenses (per BOE) Lease operating expenses and production
taxes (a) $12.54 $44.63 $12.35 $44.59 Depletion expense on oil and
natural gas properties (b) $19.07 $13.29 $18.82 $13.20
-------------------------------- (a) Excludes non-recurring
expenses related to the oil spill in the Tullos Field Area of
$10,000 and $23,591 for the three months ended December 31, 2008
and 2007, respectively. Excludes non-recurring expenses related to
the oil spill in the Tullos Field Area of $15,500 and $38,123, for
the six months ended December 31, 2008 and 2007, respectively. (b)
Excludes depreciation of furniture and fixtures of $9,794 and
$17,870, for the three months ended December 31, 2008 and 2007,
respectively. Excludes depreciation of furniture and fixtures of
$19,618 and $36,121, for the six months ended December 31, 2008 and
2007, respectively DATASOURCE: Evolution Petroleum Corporation
CONTACT: Company Contact, Sterling McDonald, VP & CFO of
Evolution Petroleum Corporation, +1-713-935-0122, ; or Lisa
Elliott, , or Jack Lascar, , both of DRG&E, +1-713-529-6600,
for Evolution Petroleum Corporation Web Site:
http://www.evolutionpetroleum.com/
Copyright
