Market Overview

Evolution Petroleum Reports Fourth Quarter and Fiscal 2019 Results

Share:

HOUSTON, TX / ACCESSWIRE / September 11, 2019 / Evolution Petroleum Corporation (NYSE:EPM) ("Evolution" or the "Company") today reported financial and operating highlights for its fiscal year ended June 30, 2019 and the fiscal fourth quarter, with comparisons to the fiscal third quarter ended March 31, 2019 (the "prior quarter") and the quarter ended June 30, 2018 (the "year-ago quarter"), as well as the fiscal year ended June 30, 2018 (the "prior year"). Evolution also reported a comparison of year-end reserves as of June 30, 2019 to the prior year reserves.

Fiscal 2019 Highlights:

  • Recorded eighth consecutive year of positive net income: $ 15.4 million, or $0.46 per share
  • Increased Oil and NGL revenues by $2.5 million to $43.2 million, an increase of 6% over the prior year, primarily driven by higher realized oil prices
  • Retained strong cash balance, as working capital grew by 17% to $32.4 million
  • Distributed $13.3 million in the form of cash dividends
  • Funded all operations and dividends, including $5.2 million of capital spending, out of cash flows from operations, and remained debt free

Subsequent to Fiscal Year ended June 30, 2019:

  • Appointed Jason Brown as President & Chief Executive Officer
  • Repurchased 167,805 shares for approximately $1 million

"Evolution finished Fiscal 2019 with continued strength in both our earnings and cash flows. Our current asset, the Delhi field, continues to benefit from the premium Louisiana Light Sweet oil pricing received over NYMEX WTI which provides a nice uplift for our revenues," said Jason Brown, President and Chief Executive Officer. "I am pleased to be taking the lead as we enter into our Fiscal 2020 and excited to take the next step of growth for our company. The Company has been built on a solid foundation comprised of positive earnings and strong cash flows that will remain the pillars of our success moving forward. Evolution's fiscal discipline has put us in an excellent position to take advantage of opportunities generated by current market trends. I am optimistic in our ability to expand our current asset base with similar long-life producing properties that fit within the company's strategy to sustain and grow the cash dividend to shareholders."

Subsequent to June 30, 2019, Evolution repurchased 167,805 shares at an average price of $5.94 and has $2.4 million remaining of the currently authorized $5 million share buyback program.

Results for the Quarter Ended June 30, 2019

Oil production for the fourth quarter was 1,669 barrels per day ("BOPD") (6,364 BOPD gross) and NGL production was 388 barrels of oil equivalent per day ("BOEPD") (1,479 BOEPD gross).

In the fourth quarter, Evolution reported operating revenues of $10.4 million. Oil revenue increased 9% to $9.8 million from the prior quarter due to a 9.5% increase in price and virtually no change in production volume. NGL revenue increased 15% to $0.5 million due to NGL plant modifications that increased production 23% to 35,285 barrels of oil equivalent ("BOE"), partially offset by a 7% price decline to $15.27 per bbl. As a result, Evolution had $4.0 million of income from operations, a 34% increase from the prior quarter.

Production costs in the Delhi field decreased to $3.6 million from $3.8 million in the prior quarter, primarily driven by 8.8% lower workover and chemical expenses. CO2 cost decreased 3.3% due to an 11% CO2 volume decrease to 92 MMcf per day, partially offset by an 8.3% increase in CO2 costs per mcf to $0.91 per mcf. Depletion, depreciation and amortization ("DD&A") expense was essentially unchanged quarter over quarter, however, the DD&A rate per BOE declined 4% to $8.07 per BOE, which will be the new depletion rate entering into Fiscal 2020.

The Company's general and administrative ("G&A") expenses were $1.3 million for the quarter, an increase of 10% from the prior quarter. The increase of G&A was reflected by the non-recurring higher consulting expenses associated with the search process for our new CEO which has concluded with the appointment of Jason Brown.

Results for the Fiscal Year 2019

Oil production for Fiscal 2019 was 1,717 BOPD (6,549 BOPD gross) and NGL production was 307 BOEPD (1,171 BOEPD gross). Total BOEs were essentially flat year over year.

Total revenues for the year increased by 6% to $43.2 million due to higher Louisiana Light Sweet oil prices, partially offset by a 3.8% decline in oil volumes. Compared to the prior year, current year NGL revenue decreased 6.5% to $2.4MM due to a 22% price decline to $22 per BOE, partially offset by a 20% production increase in NGL volumes from 93,366 to 112,103 BOE.

Production costs for the year totaled $14.3 million, or $19.31 per BOE, compared to $11.7 million, or $15.68 per BOE in the prior year. CO2 costs are the largest single production cost in the field and are tied directly to the price of oil realized in the field, thus providing some natural hedge against fluctuations in oil price. Of the $2.6 million increase in production costs, $1.95 million was due to CO2 costs and $0.6 million to other production costs. The CO2 increase was due to a 31% increase in purchased CO2 volumes together with an 8.4% higher CO2 costs per mcf to $0.90 per mcf. The other production cost increases consisted primarily of the following: $0.1 million for chemicals, $0.2 million for labor, and over $0.3 million for higher fuel gas purchases.

General and administrative expenses decreased 25% to $5.1 million in the current year primarily due to prior year increases of $0.6 million in consulting and legal fees attributable to last year's acquisition efforts, $0.6 million of prior year litigation expense, $0.8 million of stock compensation and other compensation related expenses, partly offset by $0.3 million of increased Board expenses in the current year.

Other income increased in the current year and included the non-recurring breakup fee income of $1.1 million from the previously announced stalking horse bid, as well as $0.2 million higher interest income as a result of higher interest rates earned on cash balances.

The increase in income tax expense is primarily due to prior years $6.1 million benefit for the revaluation of Evolutions deferred income tax liabilities due to a lower federal statutory rate mandated by the Tax Cuts and Jobs Act together with a 17% increase in pretax earnings for fiscal 2019, compared to the prior year.

For Fiscal 2019, as a result of the above, net income to common shareholders decreased 22% over the prior year to $15.4 million, or $0.46 per common share.

Fiscal 2020 Capital Budget and Financial Outlook

During the year ended June 30, 2019, Evolution incurred $5.2 million of capital expenditures at Delhi. This spending included $0.7 million for capital upgrades to the plant, flowlines and facilities, $1.0 million for CO2 conformance projects and capital maintenance, $1.6 million for Phase V infrastructure (i.e. water curtain wells) in the eastern portion of the field, and $1.8 million for the infill drilling program.

The twelve well infill drilling program in the Delhi field was completed in the fiscal fourth quarter and the wells are contributing. The injectors and producers were drilled and completed in areas where additional support to sweep oil was needed. There are ten producing oil wells and two CO2 injection wells. While the program was designed to drill four injection wells, two of the planned injectors were completed as producers. These wells may be recompleted as injectors at a later date. In total, the cost of the infill program was $4.7 million net to Evolution.

In Fiscal 2020 Evolution expects to spend about $0.6 million to complete the south water curtain in preparation for the Phase V development. The operator has discussed plans to further develop the field subject to their internal budget approval. The operator's budget approval process will not be completed until late 2019 or early 2020. Evolution expects the operator to continue to perform conformance workover projects and will likely incur some additional maintenance capital expenditures. Such amounts are not known or approved yet, but Evolution expects them to run in a historically seen magnitude of $1 to $2 million which, continue to fall into the non-material category of Evolution's financial position.

Funding for the Company's anticipated capital expenditures at Delhi over the next two fiscal years is expected to be met from cash flows from operations and current working capital.

Summary of Reserves as of June 30, 2019

As of June 30, 2019
Oil NGL Equivalent
MBO MBL MBOE
Proved Developed Producing
6,274 1,124 7,398
Proved Undeveloped
1,342 241 1,583
Total Proved
7,616 1,365 8,981
Probable Developed Producing
3,516 630 4,146
Probable Undeveloped
540 97 637
Total Probable*
4,056 727 4,783
Possible Developed Producing
3,323 596 3,919
Possible Undeveloped
341 61 402
Total Possible*
3,664 657 4,321

* Read the section captioned "Cautionary Statement" below addressing reserves.

As previously reported, for the year ended June 30, 2019, net proved reserves in the Delhi field totaled 9.0 million barrels of oil equivalent ("MMBOE"), a reduction of 0.4 MMBOE from the prior year consisting of 0.7 MMBOE of production, partially offset by a 0.3 MMBOE positive revision for improved well and NGL plant performance. Our trailing twelve-month average oil price, as determined in accordance with SEC guidelines, was $64.54 per barrel of oil, based on a $61.62 per barrel NYMEX WTI reference price. Our NGL price was $23.83 per barrel of oil equivalent.

Net probable reserves increased by 7% to 4.8 MMBOE from 4.5 MMBOE in the prior year. Net possible reserves decreased by 7% to 4.3 MMBOE from 4.6 MMBOE in the prior year. Of particular note, our probable and possible reserves do not require any additional development capital to be produced and are 87% and 91% developed, respectively. These categories of reserves reflect the incremental reserves associated with different engineering assumptions with respect to the percentage of original oil in place that can be recovered through CO2 enhanced oil recovery.

Conference Call

As previously announced, Evolution Petroleum will host a conference call on Thursday, September 12, 2019 at 11:00 a.m. Eastern (10:00 a.m. Central) to discuss results. To access the call, please dial 1-844-369-8770 (Toll-free US and Canada) or 1-862-298-0840 (Toll International). To listen live via webcast over the internet, go to http://www.investornetwork.com/event/presentation/53106. A replay will be available two hours after the end of the conference call through October 12, 2019 and will be accessible by calling 1-877-481-4010 (United States & Canada); 1-919-882-2331 (International) with the replay pin number of 53106.

About Evolution Petroleum

Evolution Petroleum is an oil company focused on delivering a sustainable dividend yield to its shareholders through the ownership, management and development of producing oil and gas properties. The Company's long-term goal is to build a diversified portfolio of oil and gas assets primarily through acquisition, while seeking opportunities to maintain and increase production through selective development, production enhancement and other exploitation efforts on its properties. Evolution's largest current asset is our interest in a CO2 enhanced oil recovery project in Louisiana's Delhi field. 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 forward-looking statements contained in this press release regarding potential results and future plans and objectives of the Company involve a wide range of risks and uncertainties. Statements herein using words such as "believe," "expect," "plans," "outlook" and words of similar meaning are forward-looking statements. Although our expectations are based on business, 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.

Our reserves as of June 30, 2019 were estimated by DeGolyer & MacNaughton, an independent petroleum engineering firm. All reserve estimates are continually subject to revisions based on productio

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com