Evolution Petroleum Corporation Corporate Presentation March 2017 - - PowerPoint PPT Presentation

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Evolution Petroleum Corporation Corporate Presentation March 2017 - - PowerPoint PPT Presentation

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Evolution Petroleum Corporation Corporate Presentation March 2017 Corporate Presentation March 2017 Corporate Presentation March 2017 Forwar ard Looking king Stat atement ements This presentation contains forward -looking

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Corporate Presentation – March 2017 Evolution Petroleum Corporation Corporate Presentation – March 2017

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Corporate Presentation – March 2017

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Forwar ard Looking king Stat atement ements

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 most recent 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.

Cauti autionar

  • nary Note re

regar arding ng Oi Oil and and Gas as 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, 2016 were estimated by DeGolyer & MacNaughton (“D&M”), an independent petroleum engineering firm.

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Corporate Presentation – March 2017

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  • Evolution Petroleum Founded in 2003
  • Delhi Field Acquired in 2003; Operated by

Denbury Resources, Inc. (DNR)

Texas s / Gulf lf Coas ast t Focus Overview (Quarter Ended December 31, 2016) New York Stock Exchange EPM Shares Outstanding (12/31/2016) 33.1 MM Fully Diluted Shares (12/31/2016) 33.2 MM Share Price (3/10/2017) $8.10 Total Equity Value (3/10/2017) $268 MM Common Stock Dividend (Annual Rate) $0.28 per share EPM Avg Net Production (12/31/2016) 1,987 BOPD Delhi Gross Production (12/31/2016) 7,580 BOPD Proved Reserves – 6/30/2016 10.8 MMBOE Net Working Capital (12/31/2016) $18.6 MM Debt ($10 MM Avail Capacity) None

Delhi Field Houston Headquarters

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Corporate Presentation – March 2017

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Bala lance ce Sheet

Cash $ 19,156 Other current assets 3,720 Property and equipment 63,881 Other assets 330 Tot

  • tal assets

ets $ 87,08 ,087 Current liabilities $ 4,271 Long-term debt

  • Deferred taxes and ARO

14,229 Stockholders’ equity 68,587 Tot

  • tal li

liabi bilitie ties s and equity ty $ 87,08 ,087

In Income me St Stat atem ement ent – December ember Quarter er

Delhi field oil revenues $ 8,530 Lease operating expenses 2,292 DD&A and accretion 1,321 G&A expenses and other 1,248 Income before income taxes $ 3,669 Income tax provision 1,361 Net et in income

  • me

$ 2,308 Earnings s per share e (ful ully y dil ilut uted ed) $ 0.07

Summary Financial Statements December 31, 2016

Amounts in $000’s, except EPS

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Corporate Presentation – March 2017

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Rec ecent ent De Devel elopme

  • pments

nts

Dividend Increased 40% to $0.28 per Year NGL Plant Complete and Online $27.5MM Litigation Settlement Proceeds

  • Greatly Improves Financial Strength
  • Removes Uncertainty and Continuing Legal Costs

Redemption of all Preferred Stock New $50MM Credit Agreement April 2016

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Corporate Presentation – March 2017

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Inves estm tment ent Considerat nsiderations ions

  • High Quality Asset Base w/ Near-Term Growth Catalysts
  • Extremely Long-Lived Production (25 Year Life; Much

Longer with Higher Oil Prices)

  • Debt-Free Balance Sheet with Solid Working Capital

Position

  • Positive Net Income reported in the last Five Fiscal Years
  • Attractive Dividend Yield (3%+)
  • Directors and Employees Aligned with Shareholders

through Significant Stock Ownership – Insiders own ~9%

  • Well-Positioned for New Opportunities
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Corporate Presentation – March 2017

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Delhi Field Recycle Facility and NGL Plant Foundation Cash Flow Asset for Evolution Petroleum

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Corporate Presentation – March 2017

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Delh lhi Fie ield ld EOR Pro rojec ect t Developme

  • pment

nt Exception ptional al resou

  • urce

ce:

  • 418 MMBO of gross original oil in place
  • 323 MMBO OOIP in proved flood area
  • 195 MMBO production prior to EOR
  • 13.2 MMBO since CO2 flood began

Other er advant antage ges: s:

  • No LA severance taxes (12.5%)

until financial payout of the project

  • Oil transported by pipeline
  • Delhi crude sells at LLS pricing
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Corporate Presentation – March 2017

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  • 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000

  • 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Gross BOPD Total Net BOPD Reversion of Working Interest – Nov 2014

Delhi Field d Daily ly Oil Prod roductio uction

Gro ross ss and Net et BOPD

Gross BOPD Net BOPD

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Corporate Presentation – March 2017

10 1,000 1,200 1,400 1,600 1,800 2,000 2,200 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

Del elhi i Fi Fiel eld d - Net et Dail ily y Oil il Produ ducti ction

  • n

Average Net Delhi Production by Quarter (BOPD)

1,640 1,987

21% Production Increase

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Corporate Presentation – March 2017 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%

11

(a) Field Payout and Reversion of Working Interest to EPM Occurred Effective November 1, 2014 (Working Interest in the Mengel Sand also 23.9%)

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Corporate Presentation – March 2017

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Delhi Operating Costs per BOE

$19.83 $18.15 $16.41 $13.53 $13.13 $11.72 $13.14 $12.54 20 40 60 80 100 120 140 $0.00 $4.00 $8.00 $12.00 $16.00 $20.00 $24.00 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 CO2 Purchases & Transp R&M/Labor/Chemicals Electricity Purchased CO2 MMcf/d

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Corporate Presentation – March 2017

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  • Proved Reserves assume 13.8%

Incremental CO2 Recovery (Up from 13.0% in 2015)

  • (a) 2P Combined Proved plus

Incremental Probable assumes 18.0% incremental CO2 recovery

  • (b) 3P Combined Proved,

Probable and Possible assumes 20.5% incremental CO2 recovery

  • 5,000

10,000 15,000 20,000

Proved 2P (a) 3P (b)

Oil - Developed Producing Oil - Undeveloped NGL (Now Producing)

EPM Delhi Reserves – Three Cases

(MBOE – 6/30/16)

10,823

15,320

13.8% 18.0% 20.5%

18,034 Undevelop eloped ed Reserves: es:

  • PUD Reserves for NGL Plant are

now Developed and Producing

  • Future Dev Costs for Test Site 5 are

approx $11.5MM - $8.1 .12 per Bbl

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Corporate Presentation – March 2017

14 Note: e: The amoun unts ts in the chart t above are re not intend tended ed to to repr presen esent t the fair ir mark rket et valu lue e of EPM or its asse sets.

They do not conform to GAAP and are presented solely to illustrate the effects of varying assumptions about oil prices, ultimate reserve recoveries and discount rates on the discounted future net revenues of the Company. There is no comparable GAAP measure for comparison of these amounts, which are presented on a pre-tax basis.

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450

PV-10% PV-8% PV-6% PV-10% PV-8% PV-6% PV-10% PV-8% PV-6% PV-10% PV-8% PV-6%

Oil il Price ice and Dis iscoun unt Ra Rate Sensiti nsitivi vities ties Combine bined Valu lues es as of June e 30, 2016 6 ($MM)

Cash Proved Reserves 50% of Probable Balance of Probable Thre ree e Impor

  • rtan

tant t Variabl iables: s: 1) 1) Oil il Price e Expe pectat tations 2) 2) Ult ltim imate ate Reserve rve Recovery

  • very

3) 3) Appr prop

  • pri

riate ate Discou iscount t Rate

$42.91 Price Case $50 WTI Case $60 WTI Case $70 WTI Case $50 WTI Price Case $60 WTI Price Case $70 WTI Price Case $42.91 (SEC) Price Case

Net present value, discounted at: 10% 8% 6%

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Corporate Presentation – March 2017

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Litigation igation with h Delhi lhi Operat erator

  • r Settle

ettled in June ne 2016

In a comprehensive resolution of all issues, Evolution received:

  • Cash Payment of $27.5MM
  • 23.9% Working Interest in Mengel Sand in Delhi Field

Expected to ultimately expand the Delhi project

  • Quantified attractive long-term cost for purchased CO2

Purchased CO2 is the largest part of Delhi LOE

  • Agreement for technical cooperation – Relationship improved

In turn, Evolution resolved a long-standing dispute by transferring a small 0.2% (.002) net revenue interest to the Operator

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Corporate Presentation – March 2017

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Delhi NGL Plant Photo Taken in October 2016

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Delhi NGL Storage Tanks 2,000 Bbl+ Capacity Each

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Inside General Electric LM-2500 Turbine Approx 25 Megawatt Max Capacity

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Start-up NGL Plant, Increase Production & Improve EOR Efficiency Expand CO2 Flood to Eastern Part of Delhi Field

(Price Dependent)

Expand CO2 Flood to Mengel Sand and Additional Thinner Intervals

(Price Dependent)

Multiple Projects

To Build ld Long Long-Term rm Value ue

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Corporate Presentation – March 2017

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Key Financial Matters

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Corporate Presentation – March 2017

21 $0 $2,500 $5,000 $7,500 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17e Jun-17e Sep-17e Dec-17e

Delhi i Capi pital al Spe pendi ding ng by Quarter er

NGL Plant Conformance and Other Forecast

Forecast

Cum Capex – Dec 2016

NGL Plant - $26.0MM Conformance - $5.3MM

(Post Mar 2015)

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Corporate Presentation – March 2017

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New Cred edit it Agr greement eement St Strengthens rengthens Fin inanc ancia ial l Fle lexibili xibility ty

$50 50MM MM Reserve-Bas Based d Cre redi dit Agre reeme ment nt wi with MidF dFirst st Bank k – Fi Financiall ncially y St Strong rong Pri rivat ate Bank nk

  • Initially Elected Borrowing Base of $10MM
  • Attractive Rate Structure: Mid-3% Range All-in
  • 25 Basis Points on Undrawn Borrowing Base
  • Standard 3X EBITDA and Other Covenants
  • Significant Improvement Over Prior Facility
  • Provides Additional Capacity for Future Growth
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Corporate Presentation – March 2017

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Defensiv ensive Hedging dging St Strat ategy egy

  • Goals for Hedging Program:

Pro rotec ect Divid idends ends and nd Capex x Ob Obligation igations Ret etain ain Long ng-term rm Commo modity dity Price ice Upside side

  • Policy allows Hedging of Maximum 70% of Estimated

Production not to exceed one year forward

Started Program in 2H 2015 – Realized gains of $3.4MM Added $5 per barrel to FY 2016 net realized oil price ($40)

  • Company is Cautious on Short-term Oil Prices
  • Current Collars:

41% of Marc rch-Ma May y Est Prod rod with h $50 0 WTI TI Floor

  • r and

nd $58 Ceili iling

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Corporate Presentation – March 2017

24 $- $20 $40 $60 $80 $100 $120 $0.00 $0.01 $0.02 $0.03 $0.04 $0.05 $0.06 $0.07 $0.08 $0.09 $0.10 $0.11 $0.12

Common Stock Dividends WTI Oil Prices (Qtr Avg)

Quarterly Dividend Rate per Share WTI Avg Oil Prices (Bloomberg)

EPM M Divide dend nd Hi History y vs WTI Oil Pric rices

Div $0.10 per Qtr Div $0.05 per Qtr $0.0 .07

Cumulative Payout Dec 2013 thru Dec 2016:

$29.9 MM ($0.915 per Share)

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Corporate Presentation – March 2017

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Op Oppor portuni tunities ties for r EPM

  • We see an Improving Market for Acquisitions

Price e and Value Expectatio tations ns more Rea Reaso sonab nable le

  • Over time, we expect to see a continuing rationalization of

mature conventional cash flow properties by large entities

  • We are patiently seeking opportunities which are:

Ac Accretiv etive e to Value and Cash sh Flow; w; and Support t In Incre reasin asing Long ng-ter erm m Returns eturns to Sha hare rehold holders

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Corporate Presentation – March 2017

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  • Accretive Growth
  • Delhi Field Production Increasing from CO2 Flood Enhancements
  • Low-Cost Reserves Additions and Upgrades
  • Start up of the NGL Plant at Delhi Field
  • Underlying Value
  • Long-Lived Cash Flow from Very Large Delhi Field Resource
  • Solid Balance Sheet
  • Ability to Weather the Cycle & Fund Growth Capital Expenditures
  • Well-Positioned to Capitalize on New Growth Opportunities
  • Returning Cash to Shareholders
  • Attractive Common Dividend - Potential For Future Increases
  • Flexible Share Repurchase Program Available

Val alue e Prop ropositio

  • sition

n Summar mmary