Evolution Petroleum Corporation, Inc. · AMEX:EPM
Evolution Petroleum — Non-Deal Roadshow (November 2009)
40 slides from Evolution Petroleum's roadshow presentation, Nov 16, 2009
Slide 1: November 16, 2009 (NYSE Amex: EPM)
November 16, 2009 (NYSE Amex: EPM) © Evolution Petroleum Corporation 1
Slide 2: Forward-looking statements
Evolution Petroleum Corporation This presentation contains “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. Forward- looking statements give our current expectations or fore
Slide 3: Cautionary Note to U.S. Investors Regarding Reserve Estimates
Evolution Petroleum Corporation Cautionary Note to U.S. Investors Regarding Oil and Gas Reserve Estimates: The U.S. Securities and Exchange Commission permits oil and gas companies, in their current filings with the SEC, to disclose only “Proved” reserves that a company has demonstrated by actual pr
Slide 4: Our Business
Our Business We generate & implement projects that develop oil and natural gas reserves: 9 That are located in the onshore US, 9 Are generally well known, but bypassed historically due to low commodity prices or lack of applied technology, 9 Based on a lower risk, engineered approach, and 9 Utilize
Slide 5: O&G Core Assets
O&G Core Assets (Net Reserves at 7/1/09) East OK Shale 17,600 net acres – in testing phase Delhi Field Targeting low cost, shallow gas 13.6 MMBO 2P 1P + 2P CO2-EOR 84% oil 100% oil 7% ngl 9% gas Neptune Project Giddings Field 0.5 MMBO 1P+2P+3P 3.0 MMBOE 1P + 79 additional locations 0.9 MMBOE 2P All
Slide 6: EPM Investment Highlights – Why Own EPM?
EPM Investment Highlights – Why Own EPM? 6
Slide 7: EPM Investment Highlights
EPM Investment Highlights ¾ Consistent growth in revenues ¾ Strong balance sheet with no debt ¾ Sufficient cash resources in hand to fund 2010 capital expenditure program ¾ Low cost (per well & BOE) & lower risk development upside ¾ Opportunity to realize embedded asset valuation in all projects ¾ V
Slide 8: EPM Track Record in Project Development
EPM Track Record in Project Development Engineering-driven project origination to create share value Project Invested: Results (PV-10 unrisked) Delhi EOR $6.8 MM $50 MM cash pretax + 2P PV-10 = $196.6 MM 2P PV-10 peak (in 2015) = $292 MM Neptune Oil $0.6 MM 1P – 3P Reserves PV-10 = $8.1 MM & 79 addi
Slide 9: EPM Revenues Growth by Fiscal Year
EPM Revenues Growth by Fiscal Year $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2004 2005 2006 2007 2008 2009 • Revenues in thousands • 2007 revenues decreased by farm-out to DNR 9
Slide 10: FY 2010 Capital Plan
FY 2010 Capital Plan Objectives: ¾ Substantially expand oil & gas reserves Neptune (South Texas) oil project Oklahoma gas shales Delhi ¾ Commercialize artificial lift technology ¾ Use Giddings cash income to cover overhead ¾ Avoid high cost, risky capital sources ¾ Maintain liquidity through F
Slide 11: FY2010 Plan for Growth
FY2010 Plan for Growth OK: - Continued gas shale testing of potential in Wagoner and Haskell Delhi: - DNR funding expansion of our CO2 EOR project Neptune: Giddings: - Maintain production - Drill first 3 oil wells - Drill PUDs through JV’s - Target expansion - Apply our proprietary of current 500 MB
Slide 12: EPM Assets: Delhi CO2 – EOR Project
EPM Assets: Delhi CO2 – EOR Project Milestone Achieved – CO2 injection began 11/12/09 78 mile Delta Pipeline to transport CO2 to Delhi Field Construction of first phase of produced gas facility for recycling CO2 at Delhi 12
Slide 13: EOR - Delhi Field CO2 Project
EOR - Delhi Field CO2 Project Tinsley Jackson Delhi Dome 7/1/09 Pb Net Reserves 13.6 MMBO $196.6 MM PV-10 Gross Production to date 192 MMBO Original oil in place est. 357 MMBO in (“OOIP”) project area; additional ~50 MMBO can be added Average depth 3,235’ Unit Size 13,636 acres Formations Tuscaloosa
Slide 14: Delhi Field Development by EPM & DNR
Delhi Field Development by EPM & DNR (Calendar year) 2003: Purchased working interest in Delhi Field for $2.8 million High ROIC 2004: Increased production from 20 bopd to ~145 boep/d through ~$2.5 million of capex 2006: Sold farm-out to DNR for $50 MM - retained 25% reversionary working interest aft
Slide 15: EOR Expands EPM's Reserve Base & Value
EOR Expands EPM’s Reserve Base & Value Denbury’s EOR project may recover substantially more oil due to greater reservoir volume than originally expected (based on 3D seismic), expansion of EOR to additional Tuscaloosa sand reservoirs within Unit and higher recovery factor similar to DNR’s other proj
Slide 16: Impact of Delhi Production
Impact of Delhi Production* Annual Net Pre-tax Cash Flows from Delhi per fully diluted share Gross Field Production = 1,000 2,430 5,600 7,880 10,000 BOPD BOPD BOPD BOPD BOPD < Payout Occurs > Pre & Post Payout 7.4% Royalty Interest = $0.05 $0.12 $0.27 $0.38 $0.48 After Payout 25% Reversionary WI = $
Slide 17: Conventional Re-development: Neptune, Artificial Lift, Giddings
EPM Assets: Conventional Re-development Neptune Oil Project in South Texas Artificial Lift Technology Giddings Field in Central Texas 17
Slide 18: Neptune – Oil Development Within Mature Field
Neptune – Oil Development Within Mature Field 7/1/09 Net Reserves # Locations MBO PV-10 Net Proved Reserves 4 re-entries 48 $0.5 MM Net Probable Reserves 21 247 $0.4 MM Net Possible Reserves (in 2P locations) 247 $7.2 MM 542 $8.1 MM ¾ 100% working interest and 79.7% net revenue interest; 1,710 net a
Slide 19: Neptune – Oil Development Within Mature Field
Neptune – Oil Development Within Mature Field Project based on historic downspacing in this field and similar EPM experience in comparable field in Louisiana Application of our innovative completion technology may = additional upside ~380 previous wells now P&A’d ~113 new infill locations – 4 PUD, 2
Slide 20: Proprietary Artificial Lift Technology
Proprietary Artificial Lift Technology Conventional artificial lift • Fluid level eventually drops to a level where rod pump or gas lift are no longer effective Original fluid level • This can leave substantial volumes of oil and gas. Our technology • Mobilizes remaining fluid to the pump Fluid leve
Slide 21: Giddings Field, Central Texas
Giddings Field, Central Texas 7/1/09 Net Proved Reserves = 3.0 MMBOE $35.3 MM PV-10 Net Probable Reserves = 0.9 MMBOE $10.9 MM PV-10 Drilling locations Ave Gross Recovery Ave D&C cost/well D&C / BOE 14 proved re-entries 111 MBOE/well $1.3 MM $14.64 7 proved grassroot & 270 MBOE/well $2.3 MM $10.65 2
Slide 22: Price Sensitivity of Giddings/Neptune Reserves
Price Sensitivity of Giddings/Neptune Reserves* EPM Giddings & Nepturne (1P + 2P) PV-10 per fully diluted share vs Blended Flat Commodity Price $/Share (31% oil, 34% ngl & 35% natural gas) $2.00 Proved $1.80 Probable $1.60 $1.40 $1.20 Gas price increase begins to add back $1.00 locations $0.80 $0.60
Slide 23: EPM Assets: OK Low Cost Gas Shale Project
EPM Assets: OK Low Cost Gas Shale Project 23
Slide 24: Gas Shales in Eastern Oklahoma
Gas Shales in Eastern Oklahoma Woodford EPM ¾ Up to 100 vertical and horizontal Completions Acreage Woodford completions to date offsetting EPM acreage by three other operators Tulsa ¾ Potential for conventional/secondary oil development Main Woodford Oklahoma Trend 24
Slide 25: Shallow = Low Cost
Shallow = Low Cost ¾ Developing substantial shale gas potential, targeting $0.80 - $1.25 per MCF Shallow depth = small rig and low fracturing horsepower = low day rates Two shale zones identified and tested to date Expect D&C costs to be ~$190K for vertical Wagoner well (2 zone frac) at 1500’
Slide 26: EPM Summary
EPM Summary 26
Slide 27: EPM Financial Strength
EPM Financial Strength Strong balance sheet and excellent liquidity 9 Substantial working capital 9 No external funding required for conservative capital expenditure program in FY2010 9 We control our assets and required capital expenditures Financial Strategy: a conservative approach to optimize ou
Slide 28: EPM Operational Strength for Growth
EPM Operational Strength for Growth EPM Intangibles Experienced Staff Successful Team Record FY2010 Tight sand/horizontal expertise 6 Year Track Record Technology Value Catalysts Delhi producing EPM Tangible Assets OK confirmation $6.6 MM WC & no debt Neptune producing 13.6 MMBO Delhi EOR 2P Optimiz
Slide 29: Company and IR Contacts
(NYSE Alt: EPM) Company Contact: IR Contact: Sterling McDonald, VP & CFO Lisa Elliott / lelliott@drg-e.com (713) 935-0122 Jack Lascar / jlascar@drg-e.com smcdonald@evolutionpetroleum.com DRG&E / 713-529-6600 29
Slide 30: Exhibits
Exhibits Quick Facts Liquidity EPM Growth in Reserves 2009 Events and 2010 Catalysts Effect of Different Recoveries on EPM’s Delhi Interests Accretion of Value over Time at Delhi Illustration of Giddings Development Management team Board of Directors 30
Slide 31: Quick Facts about EPM
Quick Facts about EPM ¾ Ticker Symbol EPM ¾ Fiscal Year-End June 30 ¾ Market Cap ~$97 million as of 11/09/2009 ¾ Enterprise Value ~$90 MM • 27.1 MM shares outstanding • 32.9 MM shares fully diluted • ~39% owned by institutions ¾ Financial Strength $6.6 MM in WC, no debt ¾ Assets low risk development
Slide 32: EPM Liquidity
EPM Liquidity 9/30/09 (unaudited) Selected Assets Working Capital $6,605,879 Properties & Equipment, net 29,456,824 Other Assets 54,566 Total Assets $37,476,554 Long Term Liabilities & Equity Long Term Debt $0 Other Liabilities (primarily deferred income tax) 5,662,709 Total Long Term Liabilities 5,
Slide 33: 2009 Events 2010 Catalysts
2009 Events 2010 Catalysts Accomplishments in FY 2009 9 2 Giddings PUD’s averaged initial gross 450 BOEPD per well 9 Completion of Denbury’s Delta CO2 pipeline to Delhi 9 Positive test results in OK low cost gas shale resource 9 Successful first field test of artificial lift technology in Giddings 9
Slide 34: EPM Reserves by Fiscal Year (MMBOE)
EPM Reserves by Fiscal Year (MMBOE) 14 12 10 Proved 8 Giddings 2P Delhi 2P 6 Neptune 1P-3P 4 2 0 2004 2005 2006 2007 2008 2009 • Reserves as at fiscal year end of June 30 • Does not include low cost shale gas resource in Oklahoma & additional Neptune locations • 2009 downward revisions due to commod
Slide 35: Effect of Different Recoveries on Delhi Volumes
Effect of Different Recoveries on Delhi Volumes Estimated EPM Net Probable Reserves in Delhi CO2-EOR Project (at $66.62 oil, SEC pricing) Gross Recovery in Project 45 MMBO 54 MMBO 72 MMBO EPM royalty interest (7.4%) 3.3 4.0 5.3 Other royalty interests (12.6%) 5.7 6.8 9.1 Total royalties (20%) 9.0 10
Slide 36: Delhi PV-10 Accretion With Time
Delhi PV-10 Accretion With Time Delhi Pretax PV-10* Per Diluted EPM Share (PV-10 of remaining net cash flows) D&M 7/1/09 Report Adj'd D&M for Inflation + Tax Holiday $14.00 $12.00 $10.00 $8.00 $6.00 Peak PV-10, after $4.00 collecting $37 MM $2.00 ($1.13/share) of cash flows in prior years $- 09 10 1
Slide 37: Giddings Field – Infill Development
Giddings Field – Infill Development Lease boundary - lease boundary mandatory distance between vertical wellbore and lease boundary plug Naturally occuring fractures bearing oil and gas Austin Chalk New horizontal wellbore penetrating undrained fractures Existing horizontal wellbore penetrating mult
Slide 38: Our Management Team
Our Management Team Robert Herlin, CEO & Chairman Co-founded EPM in 2003 and built company using $8.3 million of equity capital 27 years of leadership experience in M&A, development, operations and finance in public and private sectors $800 million in transactions completed Originated and le
Slide 39: Our Management Team
Our Management Team Daryl Mazzanti, VP-Operations Joined team in mid-2005; 21 years of experience in oil & gas industry Former Manager of US Business Development for Anadarko Former Production Manager, Austin Chalk for Anadarko/UPRC responsible for 1200 wells, staff of 65 and 25,000 BOEPD of p
Slide 40: Our Board of Directors
Our Board of Directors Robert Herlin, CEO, Chairman & Co-founder Laird Cagan, Director & Co-founder Managing Director – Cagan McAfee Capital Partners Formerly with Goldman Sachs and Drexel Burnham Lambert E.J. DiPaolo, Director Energy Partner with Growth Capital Partners, L.P. Former Halliburton Gro
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