Evolution Petroleum Corporation Corporate Presentation June 2019 - - PowerPoint PPT Presentation

Corporate Presentation – June 2019 Evolution Petroleum Corporation Corporate Presentation – June 2019

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Corporate Presentation – June 2019

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Forward L d Looking St Statements

This presentation contains “forward-looking statements.” 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 and potential property acquisitions. 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

• ther 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 as further outlined in our Forms 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 and we undertake no obligation to update these estimates for events after this presentation.

Cautionary Note regard rding Oi Oil and Gas Res eser erves es – SEC 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 and this presentation. Estimates of Probable and Possible reserves 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. Our reserves as of June 30, 2018 were estimated by DeGolyer and MacNaughton (“D&M”), an independent petroleum engineering firm.

Corporate Presentation – June 2019

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Free Cash Flow Quarterly Cash Dividend Stock Buy Back Program Under-levered Balance Sheet Reported Net Income

KEY TAKEAWAYS

Corporate Presentation – June 2019

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• Evolution Petroleum co-founded in 2003 by

Robert Herlin, Executive Chairman

• Delhi Field acquired in 2003
• Delhi Field CO2 project initiated in 2006 with

first production in 2010 with expansion

• ngoing into 2020 and beyond

Texas / Gulf Coast Focus Overview

New York Stock Exchange EPM Shares Outstanding 33.18 MM Share Price (6/3/2019) $6.09 Total Equity Value (6/3/2019) $202 MM Common Stock Dividend (Annualized Rate) $0.40 per share Dividend Yield (6/3/2019) 6.5%

(Nine months ended 3/31/19)

Delhi Gross Liquids Production (86% Oil) ~7,700 BOEPD EPM Net Liquids Production ~2,014 BOEPD Proved Reserves (6/30/2018) 9.4 MMBOE (78% dev) Probable Reserves (6/30/2018) 4.5 MMBOE (80% dev) Possible Reserves (6/30/2018) 4.6 MMBOE (88% dev) Cash on hand (3/31/19) $30 MM ($0.91/Shr) Debt ($40 MM+ Avail Capacity) $0.0

Delhi Field EPM Houston Headquarters

Corporate Presentation – June 2019

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• High Quality, Long-lived Asset Base

Steady cash flow from large, Delhi field resource; 20+ years remaining life Potential production additions from continuing development

 Phase V scheduled for fiscal 2020 - 2021  Upside unquantified potential by extending CO2 flood to other reservoirs

utilizing existing recycle and NGL plants

• Solid Financial Position

 $30 million cash as of 3/31/19, $0 debt and untapped $40 million revolver  Current free cash flow well in excess of dividend plus balance sheet cash

can fuel acquisitions without undue leverage

 Demonstrated conservative management philosophy provides stability to

weather future industry downturns and maintain a cash dividend to shareholders

 Positioned to capitalize on new opportunities to grow

• Attractive Dividend Yield of 6.5% as of 6/3/2019

INVESTMENT CONSIDERATIONS

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• Directly benefit our shareholders by distributing ~40-60%
• f cash flow through cash dividends

Tax Reform makes C-Corps like EPM more tax-efficient

• Conservatively invest balance of cash flow into similar,

long-life assets that fit our model and capabilities

• Diversify asset base

Geologic, product and market diversity

• Maintain solid financial position

Extend our consistent record of earnings and dividend distributions without high leverage

• Increase scale to enhance public market liquidity and

leverage overhead

CORE OBJECTIVES

Corporate Presentation – June 2019

7 $- $20 $40 $60 $80 $100 $120 $140 $0.00 $0.02 $0.04 $0.06 $0.08 $0.10 $0.12 $0.14

Common Stock Dividends WTI Oil Prices (Qtr Avg) June 2019 Dividend Declared at $0.10

Quarterly Dividend Rate per Share

WTI Avg Oil Prices (Bloomberg)

EPM Dividend History vs WTI Oil Prices

Cumulative Payout Dec 2013 thru Mar 2019 $56 MM (or $1.71/share)

Corporate Presentation – June 2019

$0 $5 $10 $15 $20 $25 $30 $35 $40 $45

2012 2013 2014 2015 2016 2017 2018 2019

Revenues Net Income

$Million

9 Mos YTD 8

Seven Consecutive Years of Net Income (& Counting)

(a) (b) (a) Includes Litigation Settlement (b) Includes Tax Reform

Corporate Presentation – June 2019

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Where is our operational cash flow going?

• Qualified Ordinary Dividends

to Shareholders

• Invested back into Delhi Field

to maintain production level into next decade

• Retained cash to redeploy

into acquisition of similar long life, mostly developed and producing assets or future dividends 2

• 100% for the benefit of

shareholders

• 1. Cash Flow From Operations, as of 3/31/19
• 2. Cash balance as of 3/31/19 is $30 million with no debt

$- $5,000 $10,000 $15,000 $20,000 $25,000 FY17 FY18 6 Mos FY19

Uses of CFFO1, $000

Paid to S/H Retained for Future Inv Invested in Delhi

$- $5,000 $10,000 $15,000 $20,000 $25,000

FY17 FY18 9 Mos FY19

Uses of CFFO1, $000

Paid to S/H Retained for Future Inv Invested in Delhi

Corporate Presentation – June 2019

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Balance Sheet

Cash $ 29,550 Other current assets 4,368 Property and equipment, net 61,354 Other assets 220 Total assets $ 95,492 Current liabilities $ 2,795 Long-term debt Deferred taxes and ARO 12,722 Stockholders’ equity 79,975 Total liabilities and equity $ 95,492

Income Statement (Nine months fiscal YTD)

Delhi field revenues $ 32,856 Lease operating expenses 10,704 DD&A and accretion 4,710 G&A expenses 3,761 Income before income taxes $ 13,681 Other (income) (1,185) Income tax provision 2,767 Net income $ 12,099 Earnings per share (fully diluted) $ 0.36

Summary Financial Statements March 31, 2019

Amounts in $000’s, except EPS

Corporate Presentation – June 2019

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Delhi Recycle Facility & NGL Plant

Delhi Field EOR CO2 Flood

• ~7,700 BOE per day
• ~86% premium Louisiana Light Sweet (LLS)
• il, connected by pipeline to market
• 3 trains of processing of recycle gas
• Rich mix of heavier NGLs, or 60% C5 + C4

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Exceptional Resource:

• 418 MMBO of gross original oil in place (“OOIP”)
• 325 MMBO gross OOIP in current proved flood area
• 195 MMBO gross production prior to EOR
• ~19 MMBO gross produced from CO2 flood since

inception

• Over 9 MMBOE of net unproven reserves that are 80+%

developed & based on increased oil recovery

• Unquantified upside through expansion as noted above
• At fixed $58 oil price, proved reserves extend field life
• ver 20 years, and unproved reserves extend life by

additional 20 years.

• Over 13,600 gross acres in units held by production

Other Advantages:

• No LA oil severance taxes (12.5%) at current oil

price

• Oil transported by pipeline from field – no current

capacity constraints

• Delhi crude price based on LLS pricing (current

premium to WTI)

• Investigating options for uplift in NGL pricing

through onsite processing

• Due to long life, small change in discount rate

results in large impact on present value of reserves while reducing impact of short term price swings

Delhi Field EOR Project

Phase I Phase II Phase III Phase IV Phase V

Unquantified future expansion in downdip thinner reservoirs & eastern phase – dependent on oil price 2011 2010 2009 2012-13 Unquantified Future Expansion 2020/21 PUD 2015-17 Infill Drilling in Phases I & II

Town

• f Delhi

2018 PUD Infill Pgm

Delhi Unit

12+ miles long

Corporate Presentation – June 2019

13 100 1,000 10,000

Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20

Gross BOEPD Total Net BOEPD Reversion of Working Interest in Nov 2014 WI & Royalty Interests Infill Dr ill Drillin illing 2018 018 Pr Prog

• gram

Con Conformance Pr Proj

• jects &

& NGL L Pla lant Phase se V V ~Fis iscal l 2020 020 First pr produ

• duction

from

• m CO

CO2 flood

• d

Delhi Field Daily Production (Tertiary)

Gross and Net BOE per Day

BOEPD Royalty Interests Only

Corporate Presentation – June 2019 EPM Interests in the Delhi Field

Costs Revenues Working Interest (a) 23.9% 19.0% Royalty Interests None 7.2% Combined Interests 23.9% 26.2%

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(a)Field Payout and Reversion of Working Interest to EPM Occurred Effective November 1, 2014 As part of 2016 litigation settlement, EPM also received 23.9% working interest in the Mengel Unit within the Delhi Field that represents unquantified nonproven upside from future expansion of project

Corporate Presentation – June 2019

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Delhi Revenue and Field Operating Margin per BOE

$- $10 $20 $30 $40 $50 $60 $70

Y YE Jun 2 2015 Y YE Jun 2 2016 Y YE Jun 2 2017 YE Ju June 20 2018 18 F FYT YTD M Mar 20 2019 19

LOE CO CO2 Co 2 Costs Field O Operati ting M g Margi gin

Rev/BOE $59.54 Rev / BOE $61.52 $39.71 $44.88

(69% of Rev)

$55.39

(65% of Rev) (69% of Rev) (71% of Rev)

Field Operating Margins of $42.52 (2015), $25.95 (2016), $30.78 (2017), $39.03 (2018) and $40.14 (Q3-19 YTD), respectively

(67% of Rev)

Corporate Presentation – June 2019

16 $5,359 $2,292 $2,397 $5,430 $4,313 $500 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 FY 2015 FY 2016 FY 2017 FY 2018 Q3 FY 2019 Bal FY 2019e

Delhi Field Capital Spending* by EPM ($000’s)

(FY 2019 amounts unaudited) Well Integrity Field Enhancement Facilities/Other New Drilling

Forecast * Chart excludes NGL Plant net capex of ~$27 MM

Corporate Presentation – June 2019

17 Proved Reserves based on 14.4% incremental CO2 recovery (up from 13.0% in 2015). Probable* and Possible* Reserves based on better recovery Reserve Report Prepared by DeGolyer & MacNaughton

6,291,850 1,798,340 993,741 284,031

6/30/18 Proved Reserves, BOE

Dev Oil Undev Oil Dev NGL Undev NGL

3,123,116 757,178 493,268 119,588

6/30/18 Probable Reserves*, BOE

3,458,331 487,893 546,212 77,057

6/30/18 Possible Reserves*, BOE

78% Developed 88% Developed 80% Developed

* Probable and Possible reserves involve considerably more risk of recovery than proved reserves – see cautionary note page 2 Remaining PUD costs for Phase V is ~$6 MM (net), or ~$6.15 per BOE

Corporate Presentation – June 2019

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Delhi NGL Plant

NGL Component % of Stream Ethane 4% Propane 24% Butanes (ISO + Normal) 32% Pentanes Plus (C5+) 40% Total 100.0%

Very Rich NGL Mix (TTM):

Producing 1,300 – 1,500 BOE

• f NGL’s per day
• NGL Plant online Jan 2017
• Operating at effective capacity
• GE turbine also at capacity

Fueled by field natural gas Replaces purchased electrical power

• NGL avg price ~41% of WTI in FYTD -

19, net of deduction of transportation and fractionation charges

Corporate Presentation – June 2019

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Maintain/improve Delhi production & improve EOR efficiency through conformance projects & possible separation

• f C5+ from NGLs

Delhi infill drilling program Expansion of Delhi CO2 flood to eastern part of field (Phase V) Expand Delhi CO2 flood to Mengel Unit, additional thinner reservoirs and further expansion to eastern edge (Phase VI, subject to oil price)

Multiple Projects To Build Long-Term Value

Corporate Presentation – June 2019

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Management and Directors

(Average BOD Tenure 12 Years / Insiders Own ~8%*)

• Robert Herlin – Chairman & Interim CEO, Co-founder
• David Joe – SVP & CFO (14 Years w/ EPM), UNOCAL Corp
• Steve Hicks – SVP of Engineering, 39 years industry experience

and 21 years in A&D and senior management

• Independent Directors:

Jed DiPaolo – Duff & Phelps, Halliburton Bill Dozier – Vintage Petroleum, Santa Fe Minerals & Amoco Kelly Loyd – JVL Advisors, LLC*, RBC Capital Marran Ogilvie – Lehman Brothers, Ferro Corp, LSB Industries

* Insider holdings cited do not include those of JVL Advisors’ funds not managed by Mr. Loyd

Corporate Presentation – June 2019

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Opportunity for EPM

• We plan to maintain and grow EPM as a market-friendly

platform to generate cash returns for shareholders from mostly developed oil & gas assets

• We focus on assets that do not require high capital

investment, long lead time to net cash flow, large scale efficiencies to be economic, or high dependency on near term commodity prices Targets are generally:

 Accretive to cash flow and value  Supportive of dividend

• We have the financial capacity to execute, with substantial

cash flow in excess of current dividend payout and no debt

Corporate Presentation – June 2019

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Acquisition Criteria

• Large majority of value is attributable to proved developed

producing reserves

• Reserves are long-life
• Properties are in locations with reasonable access to markets

and stable regulatory environments

• Transactions will provide a reasonable rate of return on a

risk-adjusted basis

• Transactions are appropriate for the size and capabilities of

Evolution, and

• Transactions are supportive of the Company’s cash dividend

Corporate Presentation – June 2019

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• High Quality, Long-lived Asset Base

Substantial, low decline cash flow from Delhi field; 20+ years remaining life Potential production additions from continuing development

 Phase V scheduled for fiscal 2020  Upside unquantified potential by extending CO2 flood to other reservoirs utilizing

existing recycle and NGL plants

• Solid Financial Position

 $30 million cash, no debt and untapped $40 million revolver  Free cash flow well in excess of current cash dividend plus balance sheet cash

can fuel acquisitions without undue leverage

 Demonstrated conservative management philosophy provides stability to

weather future industry downturn and maintain a cash dividend to shareholders

 Positioned to capitalize on new opportunities to grow

• Attractive Dividend Yield of 6.5% as of 6/3/2019

Value Proposition

Corporate Presentation – June 2019

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Thank you for your interest in Evolution Petroleum Corp (NYSE: EPM) Company Contact: David Joe (713) 935-1022 djoe@EvolutionPetroleum.com