Evolution Petroleum Posts Record Recurring Results For Fiscal 2013

The following excerpt is from the company's SEC filing.

Houston, TX, September 11, 2013 — Evolution Petroleum Corporation (NYSE MKT: EPM) today reported operating highlights for the fiscal year (“FY13”) and quarter (“Q4-13”) ended June 30, 2013.

·                  Earned $6.0 million, or $0.19 per diluted share, a 32% increase in total and a 36% increase in earnings per share for the year

·                  Delhi sales volumes increased 33% for the year to 495 net barrels of oil (“BO”) per day (6,684 gross), while fourth quarter Delhi volumes declined 6% from the prior quarter to 532 net BO per day (7,188 gross)

·                  Proved Reserves increased 2.4% overall to 13.8 million barrels of oil equivalent (“BOE”), with Delhi reserves increasing 23% to 13.5 million BOE, more than offsetting a reduction of 2.3 million BOE from the sale of noncore assets in other fields

Delhi production continued to perform well during the year and into Q4-13, and its contribution to revenue more than offset the sale of our Giddings Field production. Fourth quarter Delhi production, however, was reduced by scheduled plant work, infill drilling and the previously disclosed June release of fluids and subsequent remediation work. The reduction in sales volumes at Delhi that is due to the ongoing remediation of the fluid release is expected to continue into the second quarter of fiscal 2014, which is the fourth calendar

  quarter of 2013, when CO2 injection is expected to be restored in the area of the Delhi Field affected by the fluids release. Oil production in the affected area is expected to return to pre-spill rates following renewal of CO2 injection. We anticipate that our 24% back-in working interest should begin contributing significantly to financial results by the third quarter of fiscal 2014, which is the first calendar quarter of 2014.   The GARP® business continued to move forward during the quarter with the installation of the technology in two wells, including one that had been previously abandoned. Both wells have responded positively as expected in re-establishing material commercial production, and we are moving forward in other commercialization efforts.   Subsequent to fiscal yearend, the operator plugged back one well in our Mississippian Lime project to perforate and hydraulically fracture high in the formation. Production testing is underway, but previous results that did not meet our expectations led us to reduce our interest in April.   Robert Herlin, President and CEO, stated “With these overall results, we are evaluating methods for rewarding our shareholders in ways that efficiently transfer the value that we have created. As part of that process, during fiscal 2013 we concentrated staff and capital on core assets and projects that offer substantial near term potential impact on share value and cash flow.”   Financial Results for the Quarter Ended June 30, 2013   Revenues for Q4-13 were $5.4 million, a 10% sequential decrease from Q3-13. Quarterly net income to common shareholders was $0.9 million, or $0.03 per share diluted, a 58% decrease from Q3-13’s $2.2 million, or $0.07 per share diluted. The decline in revenue is primarily due to a 5% decrease in Delhi volumes due to scheduled maintenance, infill drilling, remediation of the June fluids release and a 6% decline in Delhi oil price. Total quarterly sales volumes were 583 BOE per day, a 7% decrease that included the Delhi decline and reduced volumes in Giddings due to property divestments.   Lease operating expense during Q4-13 declined 14% from the previous quarter due to reduced workovers in Giddings and Lopez Fields and the sale of the remaining nonGARP® producing properties in the Giddings Field.   Earnings were further impacted by higher, generally nonrecurring general and administrative costs including significant legal expenses related to updating and renewing our shelf registration and ongoing litigation, and costs related to an engineering study commissioned to evaluate recovery of natural gas liquids at Delhi that led to recognition of substantial added proved, probable and possible reserves there. Also very significant was the recognition during the quarter of a much higher income tax rate resulting primarily from property divestments that effectively unwound statutory depletion that was applied in the prior three quarters.   Financial Results for the Year Ended June 30, 2013   For fiscal 2013, net income to common shareholders increased 32% to $6.0 million, or $0.19 per diluted share, compared to $4.5 million, or $0.14 per diluted share, in fiscal 2012. Revenues increased 19% to $21.3  

  million compared to fiscal 2012 due to a 9% increase in volumes to 621 BOE per day and a 9% increase in blended product price to $94 per BOE from $86 per BOE in fiscal 2012. The increase in volumes over 2012 was due primarily to a 33% increase in Delhi volumes, primarily offset by a 43% decrease in Giddings volumes due to normal production declines and the sale of all of our noncore, nonGARP® assets during the year.   For the full year, lease operating expense decreased 8% to $7.56 per BOE due primarily to the sale of Giddings producing wells. Depreciation and depletion expense increased 14% to $1.3 million, or $5.53 per BOE, due to higher volumes and elimination of projected future capital expenditures for proved drilling locations in divested Giddings properties, partly offset by higher projected future capital expenditures at Delhi associated with installation of an NGL recovery plant.   General and administrative costs increased 22% over fiscal 2012 to $7.5 million due primarily to higher legal costs, compensation expense, divestment transaction costs that are required to be charged to operating expense instead of being netted against sale proceeds and fees associated with the NGL engineering study.   Reserves as of June 30, 2013   As previously reported, our independent reservoir engineers assigned the following reserves as of June 30, 2013:   Reserves as of 6/30/2013 (1)       Oil   NGL   Gas   Equiv   PV-10       MBO   MBL   MMCF   MBOE   (MM)   Proved Developed   10,078   9   23   10,090   $ 382.1   Proved Undeveloped   2,705   971       3,676   76.8   Total Proved   12,783   980   23   13,766   $ 459.0 *                         Probable Developed   3,561           3,561   75.2   Probable Undeveloped   4,394   1,035   13,407   7,663   59.8   Total Probable   7,955   1,035   13,407   11,224   $ 135.0                           Possible Developed   2,671           2,671   22.8   Possible Undeveloped   730   193   566   1,017   9.7   Total Possible   3,401   193   566   3,688   $ 32.5     (1)         Numbers in tables may not sum due to rounding.   FY 2014 Capital Budget   The board of directors has approved a FY-14 capital budget of at least $18 million that includes $17 million for Delhi and $1 million to $3 million for additional GARP® installations.  The Delhi capital commitment is contingent upon the actual timing of our working interest reversion. Capital expenditures in our Mississippian Lime project are dependent on a successful test of the upper zone in one of our previously drilled wells.   Funding of FY-14 capital expenditures will be provided by working capital on hand as of June 30, 2013.  

  Conference Call   As previously announced, Evolution Petroleum will host a conference call on Thursday, September 12th at 11:00 a.m. Eastern (10:00 a.m. Central) to discuss results. To access the call, please dial 1-800-860-2442 (U.S.), 1-412-858-4600 (International) or 1-866-605-3582 (Canada).   About Evolution Petroleum   Evolution Petroleum Corporation develops incremental petroleum reserves and shareholder value by applying conventional and specialized technology to known oil and gas resources, onshore in the United States.   Principal assets as of June 30, 2013 include 13.8 MMBOE of proved, 11.2 MMBOE of probable reserves, 3.7 MMBOE of possible reserves, and no debt.  Assets include a CO2-EOR project with growing production in Louisiana’s Delhi Field and producing wells and proved drilling locations in the Lopez Field in Texas.  Other assets include an interest in a joint venture in the Mississippian Lime play in Kay County, OK with probable reserves and a patented artificial lift technology designed to extend the life and ultimate recoveries of 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 state 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 use of a pre-tax measure is valuable for evaluating our Company.  PV-10 is not a measure of financial  

  or operating performance under GAAP, nor is it intended to represent the current 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       2013   2012               Estimated future net revenues   $ 865,335,587   $ 858,510,526   10% annual discount for estimated timing of future cash flows   (406,373,713 ) (412,995,901 ) Estimated future net revenues discounted at 10% (PV-10)   458,961,874   445,514,625   Estimated future income tax expenses discounted at 10%   (151,741,175 ) (161,917,132 ) Standardized Measure   $ 307,220,699   $ 283,597,493      - Financial Tables to Follow -  

  Evolution Petroleum Corporation and Subsidiaries Consolidated Statements of Operations (Unaudited)       Three Months Ended   Year Ended       June 30,   June 30,       2013   2012   2013   2012   Revenues                   Crude oil   $ 5,354,565   $ 4,334,677   $ 20,686,401   $ 16,547,415   Natural gas liquids   19,933   120,442   253,167   620,187   Natural gas   25,251   126,827   410,352   794,436   Total revenues   5,399,749   4,581,946   21,349,920   17,962,038                       Operating Costs                   Lease operating expense   452,911   430,387   1,713,833   1,708,235   Production taxes   10,774   18,839   66,905   66,764   Depreciation, depletion and amortization   371,865   302,623   1,300,207   1,136,974   Accretion of discount on asset retirement obligations   16,222   20,793   72,312   77,505   General and administrative expenses *   2,196,431   1,689,195   7,495,309   6,143,286   Total operating costs   3,048,203   2,461,837   10,648,566   9,132,764                       Income from operations   2,351,546   2,120,109   10,701,354   8,829,274                       Other                   Interest income   5,855   5,565   22,580   25,728   Interest (expense)   (16,445 ) (16,373 ) (65,745 ) (21,950 )                     Income before income taxes   2,340,956   2,109,301   10,658,189   8,833,052                       Income tax provision   1,228,368   1,014,144   4,029,761   3,700,922                       Net Income   $ 1,112,588   $ 1,095,157   $ 6,628,428   $ 5,132,130                       Dividends on Preferred Stock   168,576   168,576   674,302   630,391                       Net income available to common shareholders   $ 944,012   $ 926,581   $ 5,954,126   $ 4,501,739                       Basic   $ 0.03   $ 0.03   $ 0.21   $ 0.16                       Diluted   $ 0.03   $ 0.03   $ 0.19   $ 0.14                       Weighted average number of common shares                                       Basic   28,615,511   27,858,815   28,205,467   27,784,298                       Diluted   32,141,288   31,766,049   31,975,131   31,609,929     *General and administrative expenses for the three months ended June 30, 2013 and 2012 included non-cash stock-based compensation expense of $391,943 and $349,961, respectively.  For the corresponding one-year periods, non-cash stock-based compensation expense was $1,531,745 and $1,475,995, respectively.  

  Evolution Petroleum Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited)       June 30,   June 30,       2013   2012   Assets           Current assets           Cash and cash equivalents   $ 24,928,585   $ 14,428,548   Certificates of deposit   250,000   250,000   Receivables           Oil and natural gas sales   1,632,853   1,343,347   Joint interest partner   49,063   96,151   Income taxes   281,970   92,885   Other   918   190   Deferred tax asset   26,133   325,235   Prepaid expenses and other current assets   266,554   233,433   Total current assets   27,436,076   16,769,789               Property and equipment, net of depreciation, depletion, and amortization           Oil and natural gas properties — full-cost method of accounting, of which $4,112,704 and $6,042,094 at June 30, 2013 and 2012, respectively, were excluded from amortization   38,789,032   40,476,172   Other property and equipment   52,217   92,271   Total property and equipment   38,841,249   40,568,443               Advances to joint interest operating partner   26,059   1,366,921   Other assets   252,912   250,333               Total assets   $ 66,556,296   $ 58,955,486               Liabilities and Stockholders’ Equity           Current liabilities           Accounts payable   $ 642,018   $ 407,570   Due to joint interest partner   127,081   3,217,975   Accrued payroll   1,385,494   1,005,624   Royalties payable   91,427   294,013   State and federal taxes payable   233,548   91,967   Other current liabilities   153,182   71,768   Total current liabilities   2,632,750   5,088,917               Long term liabilities           Deferred income taxes   8,418,969   6,205,093   Asset retirement obligations   615,551   968,677   Deferred rent   52,865   70,011               Total liabilities   11,720,135   12,332,698               Commitments and contingencies (Note 14)                       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 June 30, 2013 and 2012, respectively, with a total liquidation preference of $7,932,975 ($25.00 per share)   317   317   Common stock; par value $0.001; 100,000,000 shares authorized; issued 29,410,858 shares at June 30, 2013 and 28,670,424 at June 30, 2012; outstanding 28,608,969 shares and 27,882,224 shares as of June 30, 2013 and 2012, respectively   29,410   28,670   Additional paid-in capital   31,813,239   29,416,914   Retained earnings   24,013,035   18,058,909       55,856,001   47,504,810   Treasury stock, at cost, 801,889 shares and 788,200 shares as of June 30, 2013 and 2012, respectively   (1,019,840 ) (882,022 )             Total stockholders’ equity   54,836,161   46,622,788               Total liabilities and stockholders’ equity   $ 66,556,296   $ 58,955,486    

  Evolution Petroleum Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (Unaudited)       Year Ended June 30,       2013   2012   Cash Flows From Operating Activities           Net income (loss) attributable to the Company   $ 6,628,428   $ 5,132,130   Adjustments to reconcile net income (loss) to net cash provided by operating activities:           Depreciation, depletion and amortization   1,341,055   1,150,454   Stock-based compensation   1,531,745   1,475,995   Accretion of asset retirement obligations   72,312   77,505   Settlement of asset retirement obligations   (90,531 ) (61,936 ) Deferred income taxes   2,512,978   2,549,592   Deferred rent   (17,146 ) (15,401 )             Changes in operating assets and liabilities:           Receivables from oil and natural gas sales   (289,506 ) 216,057   Receivables from income taxes and other   (189,813 ) (64,194 ) Due to/from joint interest partners   (9,947 ) 139,705   Prepaid expenses and other current assets   (33,121 ) (165,581 ) Accounts payable and accrued expenses   538,057   379,873   Royalties payable   (202,586 ) (448,638 ) Income taxes payable   141,581   9,845   Net cash provided by operating activities   11,933,506   10,375,406               Cash Flows from Investing Activities           Proceeds from asset sales   3,479,976   799,610   Development of oil and natural gas properties   (4,163,080 ) (3,291,921 ) Acquisitions of oil and natural gas properties   (755,194 ) (3,768,162 ) Capital expenditures for other equipment   —   (61,176 ) Advances to joint venture operating partner   —   (224,206 ) Maturities of certificates of deposit   —   —   Other assets   (32,160 ) (35,056 ) Net cash used in investing activities   (1,470,458 ) (6,580,911 )             Cash Flows from Financing Activities           Proceeds from issuance of preferred stock, net   —   6,930,535   Proceeds from issuance of restricted stock   32   —   Proceeds from the exercise of stock options   70,719   —   Purchases of treasury stock   (137,818 ) —   Preferred stock dividends paid   (674,302 ) (630,391 ) Deferred loan costs   (16,211 ) (163,257 ) Windfall tax benefit   794,569   249,728   Net cash provided by financing activities   36,989   6,386,615               Net increase in cash and cash equivalents   10,500,037   10,181,110               Cash and cash equivalents, beginning of period   14,428,548   4,247,438               Cash and cash equivalents, end of period   $ 24,928,585   $ 14,428,548     Our supplemental disclosures of cash flow information for the years ended June 30, 2013 and 2012 are as follows:       Year Ended June 30,       2013   2012               Income taxes paid   $ 699,874   $ 895,000               Income tax refunds and net operating loss carry-back received   $ —   $ —               Non-cash transactions:           Change in accounts payable used to acquire oil and natural gas leasehold interests and develop oil and natural gas properties   $ 157,675   $ (196,396 ) Change in due to joint venture partner used to acquire oil and natural gas leasehold interests and develop oil and natural gas properties   $ (1,692,997 ) $ 1,958,029               Oil and natural gas property costs attributable to the recognition of asset retirement obligations   $ 65,575   $ 93,522    

  Information on Oil and Natural Gas Operations       Year Ended               June 30       %       2013   2012   Variance   change                       Sales Volumes, net to the Company:                                       Delhi — crude oil Royalty (Bbl)   180,658   136,074   44,584   32.8 %                     Other properties                   Crude oil (Bbl)   15,721   15,006   715   4.8 %                     NGLs (Bbl)   7,272   12,611   (5,339 ) (42.3 )%                     Natural gas (Mcf)   139,006   266,787   (127,781 ) (47.9 )% Crude oil, NGLs and natural gas (BOE)   226,819   208,156   18,663   9.0 %                     Revenue data:                                       Delhi — crude oil   $ 19,219,036   $ 15,143,770   $ 4,075,266   26.9 %                     Other properties                   Crude oil   1,467,365   1,403,645   63,720   4.5 %                     NGLs   253,167   620,187   (367,020 ) (59.2 )%                     Natural gas   410,352   794,436   (384,084 ) (48.3 )% Total revenues   $ 21,349,920   $ 17,962,038   $ 3,387,882   18.9 %                     Average price:                   Delhi — crude oil   $ 106.38   $ 111.29   $ (4.91 ) (4.4 )%                     Other properties                   Crude oil (per Bbl)   $ 93.34   $ 93.54   $ (0.20 ) (0.2 )% NGLs (per Bbl)   34.81   49.18   (14.37 ) (29.2 )% Natural gas (per Mcf)   2.95   2.98   (0.03 ) (1.0 )% Crude oil, NGLs and natural gas (per BOE)   $ 94.13   $ 86.29   $ 7.84   9.1 % 2013                   Expenses (per BOE)                   Lease operating expense   $ 7.56   $ 8.21   $ (0.65 ) (7.9 )% Production taxes   $ 0.29   $ 0.32   $ (0.03 ) (9.4 )% Depletion expense on oil and natural gas properties (a)   $ 5.53   $ 5.22   $ 0.31   6.0 %   (a)         Excludes depreciation of office equipment, furniture and fixtures, and other assets of $44,998 and $49,954, for the years ended June 30, 2013 and 2012, respectively.   ###  

The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here.

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