Evolution Petroleum Reports Fiscal Year-end 2009 Reserves
09 September 2009 - 8:00PM
PR Newswire (US)
- Total proved & probable reserves of 17.8 MMBOE - First
reserves assigned at South Texas oil project - First independent
reserves assigned at Delhi - Shallow gas shale project test
drilling initiated HOUSTON, Sept. 9 /PRNewswire-FirstCall/ --
Evolution Petroleum Corporation (NYSE Amex: EPM) today reported
that its independent reservoir engineers have assigned net proved
and un-risked probable reserves of 17.8 MMBOE with a pre-tax PV-10
of $244 million (a non-GAAP measure defined below) as of July 1,
2009. Of the totals, 17% of the reserves and 15% of the pre-tax
PV-10 are proved, and 91% of the reserves are crude oil, condensate
and natural gas liquids (NGLs). Proved reserves totaled 3.1 million
barrels of oil equivalent (MMBOE), of which 65% are crude oil,
condensate and NGLs, with a pre-tax PV-10 of $35.8 million ($1.11
per fully diluted share). Proved reserves are net of 134 MBOE of
production during the year and downward revisions of 1.1 MMBOE,
offset by additions of 291 MBOE. Downward revisions from the prior
year ending June 30, 2008 were primarily due to NYMEX commodity
price declines of 70% for natural gas ($13.09 to $3.885 per MMBTU)
and 50% for oil ($140 to $69.89 per barrel). In particular, 87% of
the revisions were the result of five predominantly natural gas
proved locations becoming uneconomic at NYMEX gas prices below
$5.90 per MMBTU. Proved undeveloped reserves as of July 1, 2009
comprise 2.63 MMBOE with PV-10 of $28.2 million ($0.87 per fully
diluted share), and include 21 drilling locations in the Giddings
Field and four drilling locations in its Neptune oil project. No
write-downs of the full cost pool were required during the year.
Neptune Oil Project For the first time, the independent reports
included reserves assigned to the Company's Neptune oil project in
South Texas, including 541 MBO of proved, probable and possible oil
reserves, with pre-tax PV-10 of $8.1 million ($0.25 per fully
diluted share) associated with the first 25 proved and probable
drilling locations. The possible reserves are assigned to the
probable locations. The Company also has identified up to 79
additional prospective infill drilling locations on its acreage and
is preparing to initiate drilling there. Oklahoma Shale Gas
Evolution commenced its field test program in the shallow Woodford
Shale in Wagoner County of Eastern Oklahoma late in Fiscal 2009
with the re-entry of three vertical wells, drilling of three wells
and core testing. The preliminary tests are positive for both the
Woodford and a second shale reservoir. Two of the vertical wells
are scheduled for hydraulic fracturing with sand and extended
production testing to measure peak rates and decline curves.
Evolution also holds acreage in Haskell County, Oklahoma and plans
to target multiple shale gas reservoirs at depths between 4,000 and
5,000 feet. A test of the shale reservoirs is planned for fiscal
2010. Evolution believes that its net shale acreage offers up to
200 BCF of shale gas potential at a development cost of $0.75 -
$1.25 per MCF. Delhi EOR Project Also a first, Evolution engaged
DeGolyer & MacNaughton (D&M), independent reservoir
engineers, to evaluate its interests in the Delhi Field EOR project
being operated by a subsidiary of Denbury Resources. D&M
assigned 13.6 MMBO of probable oil reserves, net to Evolution, with
a pre-tax PV-10 of $196.6 million ($6.07 per fully diluted share).
The Company believes that there is additional upside potential
through a limited EOR severance tax abatement. Operationally,
Denbury has reported that first CO2 injection may be delayed by up
to three months for a minor modification to their recently
completed CO2 pipeline to the Delhi Field. If delayed, first CO2
injection would likely occur in the fourth calendar quarter of
2009, with first oil production response expected within six
months. Giddings Field The Company began fiscal 2010 with net
production of approximately 366 BOE per day from ten wells located
in the Giddings Field in Central Texas. Net proved reserves
attributable to the field are 3.0 MMBOE, with a pre-tax PV-10 of
$35.3 million ($1.09 per fully diluted share), and include fourteen
re-entry drilling locations and seven grassroots drilling
locations. Probable reserves are 0.9 MMBOE with a pre-tax PV-10 of
$10.9 million ($0.34 per fully diluted share), associated with two
probable grassroots locations and incremental reserves associated
with five proved undeveloped locations. Fiscal 2010 Capital
Expenditure Plan For Fiscal 2010, Evolution expects to conduct a
limited capital expenditure program of approximately $3 million,
funded from operations and existing working capital. Activities
will be focused on completing the production testing program in
Oklahoma, initial development drilling of infill oil wells in the
Neptune Project in South Texas, work-overs and drilling of a salt
water disposal well in Giddings to optimize production and lifting
costs, and expansion of Evolution's artificial lift technology
applications. Robert Herlin, President, stated, "We begin fiscal
2010 with no debt, a strong balance sheet and solid projects.
During the current environment of low natural gas prices, we intend
to concentrate our efforts on protecting and enhancing share value
by allocating our capital to projects that we believe can add
substantial value on a small capital outlay. In the near term, we
are focusing on developing our South Texas oil project to confirm
additional reserves and add net oil production, verifying the
potential in our gas shale acreage in Oklahoma and commercializing
our artificial lift technology that appears to be successful in its
first application in Giddings. The timing for resuming our
development drilling in the Giddings Field will depend upon
improvements in natural gas prices. Expected increases in cash flow
from our Delhi interests during calendar 2010 and beyond should
allow us to expand these development activities. " 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. The Company is well positioned to continue its
development projects in CO2 based EOR, bypassed resources and low
cost shale gas. Principal assets as of July 1, 2009 include 3.9
MMBOE of proved and probable reserves in the Giddings Field of
Central Texas, 0.5 MMBO of proved and unproved reserves with 79
additional locations in South Texas, 13.6 MMBO of probable reserves
in the Delhi CO2-EOR project in northeast Louisiana, 17,600 net
acres of leases in shallow gas shale in Eastern Oklahoma and our
proprietary artificial lift technology. Additional information,
including the Company's annual report on Form 10-K and its
quarterly reports on Form 10-Q, can be accessed on its 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. 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
statements. Company Contact: Sterling McDonald, VP & CFO (713)
935-0122 Lisa Elliott / Jack Lascar / DRG&E / 713-529-6600 As
of July 1, 2009 ------------------ % of Classification of Oil &
NGL Gas Total Total PV-10(1) PV-10(1) Reserves (MBbls) (MMcf)
(MBOE) Proved (millions) (share) Proved developed producing 246
1,106 430 14% $7.6 $0.23 Proved undeveloped 1,754 5,253 2,630 86%
$28.2 $0.87 ----- ----- ----- --- ----- ----- Total proved 2,000
6,359 3,060 100% $35.8 $1.11 ===== ===== ===== ==== ===== ===== (1)
PV-10 is a non-GAAP measure and hereinafter defined in the
"Non-GAAP Information" later in this press release. Note that PV-10
is net of capital expenditures and pre-tax. Amounts per share are
based on fully diluted shares including unvested and
out-of-the-money options and warrants. Independent estimates of
Evolution's un-risked net unproved reserves (2) include: Project
Oil & NGL Gas Total PV-10(1) PV-10(1) (MBbls) (MMcf) (MBOE)
(millions) (share) Probable Reserves ----------------- 403 3,109
921 $10.9 $0.34 Giddings Field (3) Delhi CO2 - EOR (4) 13,614 NA
13,614 $196.6 $6.07 Lopez Field - South NA Texas (3) 247 247 $0.4
$0.01 --- -- --- ---- ----- Total probable 14,264 3,109 14,782
$207.9 $6.42 ====== ===== ====== ====== ===== Possible Reserves
----------------- 247 NA 247 $7.2 $0.22 Lopez Field - South Texas
(3) --- -- --- ---- ----- Total unproved reserves 14,511 3,109
15,029 $215.1 $6.65 ====== ===== ====== ====== ===== (2) Please see
cautionary note below regarding unproved reserves (3) PV-10 based
on constant prices as of 7/1/09 and based on the report by W.D. Von
Gonten & Co. using un-escalated pricing of $69.89 per barrel of
oil and $3.885 per MMBTU natural gas. (4) Delhi CO2 EOR Project
estimates were assigned by Degolyer & MacNaughton using
un-escalated pricing of $66.62 per barrel of oil in effect as of
7/1/09. Reconciliation of PV-10 to Standardized Measure of
Discounted Future Net Cash Flows PV-10 of proved reserves is a
non-GAAP financial measure; therefore, the following table
reconciles our calculation of PV-10 of proved reserves to the
standardized measure of discounted future net cash flows, which is
the most directly comparable GAAP financial measure. Management
believes that the presentation of the non-GAAP financial measure of
PV-10 provides useful information to investors because it is widely
used by professional analysts and sophisticated investors in
evaluating oil and natural gas companies. Management believes that
PV-10 (defined as the net present value of future pre-tax revenues,
operating expenses and capital expenditures based on constant
current pricing and costs and discounted at 10% per annum) is
relevant and useful for evaluating the relative monetary
significance of oil and natural gas properties. Further,
professional analysts and sophisticated investors may utilize the
measure as a basis for comparison of the relative size and value of
our reserves to other companies' reserves. Management also uses
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 us. 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 of
discounted future net cash flows as defined under GAAP. The
following table represents a reconciliation of our PV-10 of proved
reserves to Standard Measure of discounted future net cash flows.
At July 1, 2008 At July 1, 2009 (unaudited) (unaudited) (millions)
(millions) --------- --------- Present value of estimated future
net revenues (PV-10) $160.3 $35.8
------------------------------------- ------ ----- Future income
taxes, discounted at 10% (63.2) (12.3)
------------------------------------- ------ ------ Standardized
measure of discounted future net cash flows $97.1 $23.5 ===== =====
Following is a reconciliation of the Company's proved oil and
natural gas reserve quantities between July 1, 2008 and July 1,
2009: MBOE ---- Balance at 7/1/2008 4,018 FY 09 net wellhead sales
(134) Revisions (1,115) Additions 291 --- Balance at 7/1/2009 3,060
===== Cautionary Note Regarding Unproved Reserves. The United
States Securities and Exchange Commission (the "SEC") has generally
permitted natural gas and oil companies, in their filings with the
SEC, to disclose only proved reserves that a company has
demonstrated by actual production or conclusive formation tests to
be economically and legally producible under existing economic and
operating conditions. We use the terms "Probable Reserves",
"Possible Reserves" or other descriptions of unproved volumes of
hydrocarbons that the SEC guidelines may prohibit us from including
in filings with the SEC. Estimates of unproved reserves do not
reflect volumes that are demonstrated as being commercial or
technically recoverable. Even if commercially or technically
recoverable, a significant recovery factor would be applied to
these volumes to determine estimates of proved reserves.
Accordingly, these estimates are by their nature more speculative
than estimates of proved reserves and accordingly are subject to
substantially greater risk of being actually realized by the
Company. DATASOURCE: Evolution Petroleum Corporation 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/
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