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Transcript of August 18, 2015. 2 Forward-Looking Statement The data contained in this presentation that are not...
2
NYSE MKT: EPM Forward-Looking Statement
The data contained in this presentation that are not historical facts are “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such statements may relate to capital expenditures, drilling and exploitation activities, production efforts and sales
volumes, Proved, Probable, and Possible reserves, operating and administrative costs, future operating or financial
results, cash flow and anticipated liquidity, business strategy, property acquisitions, and the availability of drilling rigs
and other oil field equipment and services. These forward-looking statements are generally accompanied by words such
as “estimated”, “projected”, “potential”, “anticipated”, “forecasted” or other words that convey the uncertainty of future
events or outcomes. Although we believe the expectations and forecasts reflected in these and other forward-looking
statements are reasonable, we can give no assurance they will prove to have been correct. These statements are based
on our current plans and assumptions and are subject to a number of risks and uncertainties such as potential litigation
as further outlined in our most recent 10-K and 10-Q. Therefore, the actual results may differ materially from the
expectations, estimates or assumptions expressed in or implied by any forward-looking statement made by or on behalf
of the Company. Cautionary Note to U.S. Investors – The SEC modified its rules regarding oil and gas reserve information
that may be included in filings with the SEC. The current rules allow oil and gas companies to disclose not only Proved
reserves, but also Probable and Possible reserves that meet the SEC’s definitions of such terms. We disclose Proved,
Probable and Possible reserves in our filings with the SEC. Our reserves as of June 30, 2015 were estimated by DeGolyer
& MacNaughton (“D&M”), and reserves in prior years include work by D&M, W. D. Von Gonten & Co., and Pinnacle Energy
Services, LLC, all independent petroleum engineering firms. In this presentation, we make reference to Probable and
Possible reserves, and “2P” and “3P” reserves that aggregate categories of reserves. These estimates are by their
nature more speculative than estimates of Proved reserves and are subject to greater uncertainties, and accordingly the
likelihood of recovering those reserves is subject to substantially greater risk.
3
NYSE MKT: EPM Vital Statistics
Overview (Fiscal Year End June 30)
Shares Outstanding (3/31/2015) (a) 32.9 MM
Dilutive Securities (3/31/2015) 0.1 MM
Fully Diluted Shares (3/31/2015) 33.0 MM
Share Price (8/14/2015) $5.03
Market Capitalization (8/7/2015) $166 MM
Common Dividend (Annualized) $0.20 Per Share
Debt (3/31/2015) None
Proved Reserves – 6/30/2015 12.4 MMBOE
Proved PV-10 – 6/30/2015 $219 MM
% Oil 80% (0% gas)
% PDP 59%
Avg Production (Gross/Net) 6/30/15
6,328 / 1,677 BOPD
Net Working Capital (3/31/2015) $18.4 MM
Borrowing Capacity (b) $5 MM(a) Does not reflect shares repurchased by company post
3/31/2015.(b) Unsecured revolver, undrawn.
Houston Headquarters
Delhi Field
Texas/Gulf Coast Focus
Evolution Petroleum Founded 2003 Delhi Field Acquired in 2003,
Operated By Denbury Resources
Company Profile
4
Generating Returns for Shareholders
RECOVERING MORE OIL
Applying Innovative Engineerin
g
Into Known
Oil & Gas Assets
By People Aligned
with Shareholde
rs
To Generate Cash Flow
to Fund Growth
and Dividends
Recovering
More
NYSE MKT: EPM
How We Allocate Capital
• The engineering must be understandable and economics make sense
• The financial risk must be reasonable and conservative
• The investment/deal must be accretive in value and cash flow
• The investment/deal must support cash returns to shareholders
5
NYSE MKT: EPM Financially Strong and Shareholder Friendly
High Quality Asset Base
Extremely Long-Lived Production (~40 Years for Delhi)
Solid, Debt-Free Balance Sheet
Competitive Dividend Yield (4.0%, as of 8/14/2015)
Every Employee Aligned with Shareholders through Significant Stock Ownership
Well-Positioned for Opportunities in the Cycle
Near-Term Growth Catalysts
Investment Considerations
7
NYSE MKT: EPM
Huge Resource 418 MMBO of Gross Original Oil In Place 192 MMBO Production Prior
to EOR Project, 5+ MMBO Since
Current Production1,677 Net (6,328 gross) BOPD
Growth Catalysts NGL Recovery Plant Expected Online
~Summer of 2016, Targeting 2,000+ BLPD of Higher Valued NGLs and Improved Oil Rate
Planned Expansion of CO2 Flood To Remaining Eastern Area Expected To Materially Increase Oil Rate
Expected Expansion of CO2 Flood To Thinner Reservoirs
Other No LA Severance Tax (12.5%)
Into Next Decade Delhi Crude Sells at LLS Price With Low
Transportation Cost(Typically at a Premium to WTI)
CO2 Enhanced Oil Recovery Asset
Delhi Field
24.7 MMBOE Net 3P to Recover
Delhi Field EOR Project Development
8
NYSE MKT: EPM Reversionary WI Effective Nov-2014
10-M
ar
10-A
ug
11-Ja
n
11-Ju
n
11-N
ov
12-A
pr
12-S
ep
13-F
eb
13-Ju
l
13-D
ec
14-M
ay
14-O
ct
15-M
ar
15-A
ug
15-Ja
n
15-Ju
n
15-N
ov
4/15
/201
7
9/15
/201
7
2/15
/201
8
7/15
/201
8
12/1
5/20
18
5/15
/201
9
10/1
5/20
19
3/15
/202
0
8/15
/202
010
100
1,000
10,000
Delhi Field Oil and NGL Production
Gross Barrels EPM Net
Barr
els
Per
Day
Peak Proved Pdn in 2020Peak 2P Pdn in 2026
Reversion of Working Interest (Nov-2014)
Delhi EOR Production Profile
9
NYSE MKT: EPM
• 7.4% of gross revenues
• No CapEx or OpEx…ever
7.4% Royalty Interest
• Reversion occurred Nov-2014
• Bears 23.9% of CapEx and OpEx
23.9% Working Interest & 19%
NRI
26.4% Net Revenue
Interest
Delhi Field Interest ProfileHigh Value Interests
10
Oil80%
NGL20%
12.4 MMBOE Proved Reserves
Proved
50%Prob.38%
Poss.12%
24.7 MMBOE 3P Reserves
At June 30, 2015Delhi Reserves Profile
11
NYSE MKT: EPM High Developed Content & Low Cost Development
Proved Probable Possible0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
59%43%
55%
Developed Reserves as Percent of Total by Classifica-tion
Developed Undeveloped
High-Quality Reserves
$7.07 Per BOE Remaining 2P Development Cost
12
NYSE MKT: EPM Major Growth Catalyst
Captures C3+ NGL Production By Projected 2,000+ BLPD
Improve CO2 Flood Efficiency and Expected Oil Rate
Methane Gas Recovery to Power Plant and Existing Facilities, Replacing Much or All of Currently Purchased Power & Natural Gas
$24.6 MM Net CapEx Commitment $14-15 MM in Calendar Year 2015 $10-11 MM in Calendar Year 2016
Expected Startup in Summer 2016
NGL Recovery Plant
13
NYSE MKT: EPM Delhi Field Development Plan
Install NGL Recovery Plant, Increase Production ~2,000 BLPD
Expand CO2 Flood to Eastern Half of Delhi Field (Price Dependent)
Expand CO2 Flood to Additional Thinner Intervals
Building Momentum
Multiple ProjectsTo Build
Long-Term Value
15
NYSE MKT: EPM Patented Solution
PROBLEM:
Industry losing economic value and large quantities of reserves and production as horizontal and vertical wells are impacted by liquid loading and increased down hole gas/liquid separation problems
SOLUTION:
GARP® installation to accelerate production and recover tail reserves
HOW IT WORKS:
Supplements and enhances the existing rod pump while protecting from solids and reducing gas locking
Mobilizes remaining fluid to rod pump inlet to unload liquids and insulate rod pump from gas locking
PROOF OF CONCEPT:
Five commercial installations currently producing Recently installed on 4 wells in Giddings Field and 1
well in Permian Three newly signed MSA’s to install for major and
two large independent oil companies in Barnett and Permian
GARP® Recovers More Oil
16
NYSE MKT: EPM
Patent Secured
Pilot Programs Established
Analyze Results & Adapt to Meet Industry Needs in Small Casing and Deviated Holes
Early Adoption
Industry Accepted Solution
Path to CommercializationEstablished
Development PathGARP® Recovers More
18
NYSE MKT: EPM Shareholder Friendly
Common Dividend
s
• $0.20 Per Common Share
Preferred Dividend
s• $674K per Year
Flexible Share
Repurchase Plan
• Up to $5 MM Total
CapEx 2015/201
6
• Est $14-15 MM in Cal 2015 for NGL Plant
3/31/15 Working Capital; $18.4
Unsecured Revolver;
$5.0
$23.4 MM Liquidity (March 31, 2015) $21.6 MM Returned
to Shareholders Since FY 2013(a)
Investing in Growth
NGL Recycle Plant to Capture 2,000+ BLPD
Liquidity and Investment
(a) (1) Includes dividends on Common Stock of $$9.8 MM in FY 2014 and $9.8 MM paid FY 2015 and (2) dividends on Preferred Stock of $0.674 M in each of FY 2013, 2014 and 2015
19
NYSE MKT: EPM Ability to Withstand the Cycle
XCO
EXXI SN
LGCY
WRE
SMHR
CWEI
REXX SM EP
EEO
XRR
CBC
EI
JONE
BBG
NFX CPE
DNRER
NAX
AS QEPDVN
MTD
RPD
CEEO
GEG
NMUR
FANG
AREX M
CF
USEG
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
Debt to Equity (as of March 31, 2015)
Strong Balance Sheet
Debt-FreeAt March 31, 2015
ZER
O
20
NYSE MKT: EPM Capital Budget ProtectionHedging Program
Time Period Volume (BOPD)
Floor ($/BBL)
Ceiling($/BBL)
July – Dec 2015 550 $54.00 $66.50
July – Dec 2015 550 $56.00 $61.60
Total 1,100
Two-Thirds Estimated Production Covered
Note:1. Over 500 BOPD unhedged.2. Hedges are for WTI exposure only; LLS spread to WTI remains unhedged.3. No hedges in place for sales after Dec 2015.
22
NYSE MKT: EPM Recovering More, Generating Returns
Accretive Growth Delhi Field Production Increasing From Ongoing CO2 Flood
Development Low-Cost Reserves Additions and Upgrades Installation of NGL Recovery Plant at Delhi Field – Summer 2016
Underlying Value Long-Lived (40+ Years) Cash Flow from Huge Delhi Field Resource GARP® Patented Technology
Enviable Balance Sheet Ability to Weather the Cycle & Fund Growth Capital Expenditures Potential to Capitalize on Cyclical Opportunities
Returning Cash to Shareholders Competitive Common Dividend - Potential For Increases Flexible $5 MM Share Repurchase Program
Summary