Evolution Petroleum Corporation, Inc. · AMEX:EPM
Evolution Petroleum — Investor Presentation (January 2010)
34 slides from Evolution Petroleum's investor presentation, January 2010
Slide 1: Corporate Presentation
Corporate Presentation January 2010 (NYSE Amex: EPM) © Evolution Petroleum Corporation 2
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 forec
Slide 3: Cautionary Note to U.S. Investors Regarding Oil and Gas 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 EPM generates and implements oil & gas projects in the onshore U.S. utilizing our expertise and modern technology. Our business model is focused on building share value: • Generate project ideas • Capture project value without overpaying in acquisition cost • Initiate development to pro
Slide 5: Quick Facts about EPM
Quick Facts about EPM ¾ Ticker Symbol EPM ¾ Fiscal Year-End June 30 ¾ Market Cap ~$122 million as of 1/10/2010 ¾ Enterprise Value ~$116 MM (based on 9/30/09 WC) • 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 as of
Slide 6: Oil & Gas Core Assets
Oil & Gas Core Assets (Net Reserves at 7/1/09) East OK Shale 17,780 net acres – in testing phase Delhi Field Targeting low cost gas 76% of reserves Total 1P + 2P CO2-EOR 84% oil 100% oil 7% ngl 9% gas Giddings Field Neptune Project 22% of reserves 2% of reserves in 25 locations Horizontal – naturall
Slide 7: Why own EPM?
Why own EPM? ¾ Employees own 21% of EPM (fully diluted) – fully aligned with shareholders ¾ Growing cash flows from Delhi expected by mid-2010 ¾ Long life oil reserves at Delhi with no cap-exp and limited op-ex (our “annuity”) ¾ No debt and no need to raise capital for 2010 Plan ¾ Our development pr
Slide 8: Why own EPM? Valuation Parameters
Why own EPM? Valuation Parameters 1P + 2P reserves (7/1/09) of 17.8 MMBOE 1P + 2P reserves (7/1/09) PV10 of $250 million, or $7.60 per fully diluted share 1/10/10 market-based enterprise value per 1P+2P reserves is $6.74 per BOE Current and forward curve commodity prices well in excess of pr
Slide 9: EPM team has a successful track record
EPM team has a successful track record Engineering-driven project origination to create share value Project Invested: Results (7/1/2009 PV10 unrisked) Delhi EOR $6.8 MM $50 MM cash pretax + 2P PV10 = $196.6 MM 2P PV10 peak (in 2015) = $292 MM Neptune Oil $1.0 MM 1P – 3P Reserves PV10 = $8.1 MM & up
Slide 10: Operating Plan for 7/1/09 - 6/30/10
Operating Plan for 7/1/09 - 6/30/10 A limited capital expenditure program to: ¾ Drill 2 producers and 1 injector to demonstrate Neptune potential ¾ Conduct extensive production test of Woodford and Caney Shales in OK to demonstrate shallow gas shale potential ¾ Establish proved reserves in Delhi EOR
Slide 11: EPM Assets: Delhi CO2 – EOR Project
EPM Assets: Delhi CO2 – EOR Project Milestone Achieved – CO2 injection began 11/12/09 Targeted rate & pressure reached 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 12: EOR - Delhi Field CO2 Project
EOR - Delhi Field CO2 Project Delhi Tinsley 7/1/09 Pb Net Reserves 13.6 MMBO $196.6 MM PV10 Gross Production to date 192 MMBO Jackson Original oil in place est. 357 MMBO in current Dome (“OOIP”) project area; Average depth 3,235’ Unit Size 13,636 acres Formations Tuscaloosa & Paluxy Reserves Basis C
Slide 13: Additional Value: 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 14: Valuation of Delhi reserves & upside potential
Valuation of Delhi reserves & upside potential ¾ EOR project may recover substantially more oil due to greater reservoir volume than originally expected, expansion of EOR to additional reservoirs within Unit and higher recovery factor than 15%, similar to DNR’s other projects ¾ EPM’s 25% reversionar
Slide 15: 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 16: Neptune – Low Risk / Low Cost Oil Development
Neptune – Low Risk / Low Cost Oil Development ¾ 100% working interest and 79.7% average net revenue interest in 1,710 net acres ¾ Net 3P reserves from 4 re-entries and 21 locations of 542 MBO for PV10 of $8.1 million ¾ Up to 90 additional drilling locations projected from historical infill results –
Slide 17: 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 • This can leave substantial volumes of oil and gas. Original fluid level Our technology • Mobilizes remaining fluid to the pump • Cost $5
Slide 18: 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 14 proved re-entries 111 MBOE/well $1.3 MM $14.64/boe 7 proved grassroot & 270 MBOE/well $2.3 MM $10.65/boe
Slide 19: 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 Prices as of 1/10/10 $1.60 $1.40 $1.20 Gas price increase begins to add back $1.00
Slide 20: Gas Shales in Eastern Oklahoma
Gas Shales in Eastern Oklahoma ¾ Over 100 vertical and horizontal Woodford EPM Woodford completions to date Completions Acreage offsetting EPM acreage by other operators in Wagoner County ¾ Offset short lateral in Woodford on Tulsa track to produce ~1.1 BCF in Haskell County Main Woodford Oklahoma T
Slide 21: Our OK Gas Shales: Shallow = Low Cost
Our OK Gas Shales: Shallow = Low Cost ¾ EPM is targeting a development cost of $0.80 - $1.25 per MCFe Shallow depth = small rig and low fracturing horsepower = low day rates Two shale zones identified and tested to date – Woodford & Caney Expect D&C costs to be ~$200K for vertical Wagoner well
Slide 22: EPM Financial Strategy
EPM Financial Strategy Our financial strategy: a conservative approach to optimize our asset values over the next few years without requiring external capital obtained on unfavorable terms. 9 Substantial working capital and equity 9 No external funding required for FY2010 unless we choose to acceler
Slide 23: Catalysts for growth in FY2010
Catalysts for growth in FY2010 9 Injection of CO2 at Delhi (11/12/09) 9 First production tests in OK gas shales 9 First drilling in S Tx Neptune 9 First field tests of artificial lift technology First production response at Delhi Confirmation of Neptune reserves Confirmation of OK potential
Slide 24: 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 25
Slide 25: Exhibits
Exhibits Liquidity EPM Growth in Reserves 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 26
Slide 26: 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 27: 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 • June 30 fiscal year-end 28
Slide 28: 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 29: 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 30: 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 31: 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 32: 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 33: 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 34: 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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