The Houston Energy Conference November 13-15, 2007

Transcription

1 The Houston Energy Conference November 13-15, 2007 (AMEX: EPM) Evolution Petroleum Corporation

2 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 forecasts of future events. They include statements regarding our future operating and financial performance. 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. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. You should understand that the following important factors, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements relating to: (1) amount, nature and timing of capital expenditures; (2) drilling of wells and other planned exploitation activities; (3) timing and amount of future production of oil and natural gas; (4) increases in production growth and proved reserves; (5) operating costs such as lease operating expenses, administrative costs and other expenses; (6) our future operating or financial results; (7) cash flow and anticipated liquidity; (8) our business strategy, and the availability of acquisition opportunities; (9) hedging strategy; (10) exploration and exploitation activities and property acquisitions; (11) marketing of oil and natural gas; (12) governmental and environmental regulation of the oil and gas industry; (13) environmental liabilities relating to potential pollution arising from our operations; (14) our level of indebtedness; (15) timing and amount of future dividends; (16) industry competition, conditions, performance and consolidation; (17) natural events such as severe weather, hurricanes, floods, fire and earthquakes; and (18) availability of drilling rigs and other oil field equipment and services. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation or as of the date of the report or document in which they are contained, and we undertake no obligation to update such information. The filings with the SEC are hereby incorporated herein by reference and qualifies the presentation in its entirety.

3 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 filings with the SEC, to disclose only Proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The Company is prohibited from disclosing other categories of reserves in its SEC filings. We use certain terms in this press release such as "Probable or Possible oil and gas reserves that the SEC s guidelines strictly prohibit us from including in filings with the SEC. U.S. investors are urged to consider closely the disclosure in our SEC filings, available from us at 2500 City West Blvd, Suite 1300, Houston, Tx 77042; Telephone: You can also obtain these filings from the SEC by calling SEC The reserve quantities reflected above were certified by W. D. Von Gonten & Company using the 1997 definitions and standards of the Society of Petroleum Engineers and World Petroleum Congresses. These definitions and standards may result in estimates of proved reserves which are materially different from those disclosed in the Company s filings with the SEC.

4 Company Overview Listed : AMEX in July 2006 Ticker Symbol : EPM Market Cap : ~$80 million Shares Outstanding : 26.8 million Ownership Profile (fully diluted): Management - 19% Institutions - 19% Non-management Directors - 42% (including affiliates) Oil & Gas Reserves at November 1, 2007 (using 7/1/07 prices): Proved = 2.5 MMBOE (increased 49% since 6/30/07) Probable = MMBO

5 EPM Operating Strategy We acquire known oil and gas resources in the onshore U.S. and develop or redevelop new reserves and production using current technology We focus on mature oil and gas fields that matured prior to modern technology and the relatively recent step level increase in oil and gas prices.

6 EPM Investment Highlights Multiple ongoing development projects 22 proved development drilling locations in inventory Balance sheet supports growth with $24+ million in available cash, ~$4 MM in leases and no funded debt Experienced management team with specific expertise in programs and a successful team record Company intrinsic value in: $0.90 available cash per O/S share + $1.75 estimated future net revenues discounted at 10%, per outstanding share (prices as at 7/1/07) bbls of Delhi CO2 (probable) reserves per outstanding share + Ongoing development projects

7 The EPM Opportunity Our Expertise Horizontal drilling Field development Acquisitions Ideas Our Capital Our Developing Technology Artificial lift Innovative completions Project Financing

8 EPM Initiatives Enhanced Oil Recovery (EOR) via gas floods Bypassed Resources horizontal drilling Unconventional Gas Development gas shales

9 Initiative I - Enhanced Oil Recovery Expand and extend presence in enhanced oil recovery, through: Miscible Gas Flooding Typically CO2, which combines with crude oil to change fluid properties incremental recovery can be 8%-20+% of original oil in place. Example - Delhi Field Immiscible Gas Flooding Where CO2 not economically available, we utilize a compatible gas, and may combine with innovative completion technology when water contact present.

10 Delhi Field Development 2011/12 Payout projected 2009 Material production increase Delhi Field 2008 CO2 Injection projected by operator to occur in Second Quarter. Production response expected to follow shortly after 2007 ROW and CO2 Pipe Acquisition, followed by pipeline construction 2006 Acquired 7.4% of royalty interests for $1.5 million from multiple sellers. In June, we sold a farm-out of our working interests in Delhi to Denbury 2004 Increased production to a peak level of ~145 boepd through expenditures of ~ $2.5 million 2003 Purchased the working interest in the Delhi Field for $2.8 million

11 EPM Proceeds from Delhi Farm-Out $50 million in gross cash proceeds 25% back-in working interest in the Unit Retained our separate 7.4% overriding royalty interest DNR commits proved CO2 reserves and financially committed to install $100+ MM CO2 EOR project

12 Delhi Holt Bryant Unit Oil Recovery Estimated OOIP: 400 MMBO Cumulative Production To Date: 190 MMBO (<50% of OOIP) Remaining OIP : (>50% of OOIP) 210 MMBO Current technology makes this recovery economical even at low oil prices.

13 EPM - Delhi Unit Oil Recovery 400 MMBO OOIP (est.) MMBO EOR (est.) Cumulative Production To Date ~190 MMBO APO WI ~32-45 MMBO EOR Recovery MMBO est d BPO WI ~6 MMBO Remaining Resource for recovery in future through technology & higher oil price ~ MMBO EPM ORRI MMBO Other Royalties ~6-7.9 MMBO

14 EPM - Delhi Unit Oil Recovery Cumulative Production To Date EOR Recovery 400 MMBO OOIP (est.) MMBO EOR (est.) APO WI ~32-45 MMBO EPM APO WI MMBO (est.) DNR APO WI Remaining OIP Resource for recovery in future EPM ORRI MMBO (est.)

15 Delhi CO2-EOR Project Status Operator is recognized as a leader in tertiary recovery operations invested over $50MM ROW and steel being acquired, PL construction underway Operator s total incremental cost likely to be ~$5 per net BO Delhi is one of higher valued projects in operator s portfolio and firmly positioned in their stated projects-in-progress Delhi gives operator strategic positioning to expand CO2 access westward

16 EPM Cash Flows EPM Asset Base Cash Resources + existing proved reserves in Tullos Field + quality probable reserves in EOR-CO2 project under way in Delhi Field requiring no capital expenditures and limited operating expense by EPM PRODUCTION Tullos Proved CASH** Delhi CO2 Project TIME

17 Initiative II Bypassed Resources Acquire and develop known bypassed resources : We focus on dual porosity, fractured, tight, low energy or heavy oil reservoirs bypassed due to technology or commodity prices, and we Apply horizontal drilling Apply hydraulic fracturing Apply innovative completions & technology

18 Initiative II Projects Underway We are actively leasing in four development projects in Giddings Field area of central Texas Drilling locations 100% WI in 22 proved locations Leases ~8,000 net acres to date Pending up to 40 locations being leased, and a fifth project area in development These projects involve: Horizontal drilling from new wells and re-entries in naturally fractured Austin Chalk and Georgetown formations Potentially applying our proprietary artificial lift technology in targeted opportunities We expect to commence an $8.5 MM, ten well drilling program shortly First PUD drilled in Tullos Field (La) to test innovative completion technology results expected by end of calendar year, but early indications are promising

19 EPM Cash Flows Business Plan * Cash resources fund Bypassed Resource projects for near term revenues, income and net cash flows. PRODUCTION EPM Cash* Current Bypassed Resources CASH** Delhi CO2 Project TIME

20 Initiative III Unconventional Resources Gas Shale Two mid-continent resource projects in leasing stage third project pending Over 7,500 acres leased to date Initial drilling (core holes) and further evaluation expected in 2008

21 EPM Cash Flows Business Plan * Current cash resources fund Bypassed Resource projects ** Generated net cash flows fund gas shale projects now leasing PRODUCTION EPM Cash* Current Bypassed Resources CASH** Delhi CO2 Project Unconventional Gas TIME

22 EPM Cash Flows Business Plan 2 new EOR and Bypassed Resource projects are already in the evaluation stage PRODUCTION EPM Cash* Current Bypassed Resources CASH** Delhi CO2 Project New EOR & Bypassed Resource Projects Unconventional Gas TIME

23 Executing On Our Initiatives Evaluation using existing data 2 Projects Model & check acreage 6 Projects Leasing 1 Project (Tullos) Drilling of test well(s) 1 Project (Delhi) Develop & expand Idea Internal Project External Project EPM Expertise & Capital Outside Capital

24 Successful Record of Value Growth Net (Intrinsic) Assets (Proved Reserves + 50% Delhi CO2-EOR) $250,000,000 WC + Leases less Debt Pvd Pb-CO2 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $- $(50,000,000) 9/23/03 1 6/30/04 2 6/30/05 3 6/30/06 4 6/30/ /1/07 6 Note: Proved Reserves estimated future net revenues discounted at 10% by independent engineer using 7/1/07 prices. Probable Reserves by Company (risked by 50%) include only Delhi CO2-EOR project estimated future net revenues discounted at 10% using $55 oil price escalated at 3%.

25 Aggregate ~30% Annualized ROI to Shareholders (Market Price to Investment) Equity Tranches by Issue Price, Amount, Date & Current Price Range $9.00 $8.00 $7.00 Net (Intrinsic) Assets cash + Proved + 50% Delhi EOR-CO2 $6.00 $5.00 $4.00 $3.00 $2.00 Approximate Market Price $1.00 $- Jun-03 Jan-04 Aug-04 Feb-05 Sep-05 Mar-06 Oct-06 Apr-07 Nov-07

26 Our Management Team Robert Herlin, CEO & Director Co-founded EPM in 2003 and built company using $8.3 million of equity capital 25 years of leadership experience in M&A, development, operations and finance in public and private sectors $800 million in transactions completed Originated and led horizontal drilling team in early years of horizontal drilling adoption B.S. and M.E. in chemical engineering (Rice University) and MBA (Harvard) Sterling McDonald, CFO CFO since 2003 Former CFO for PetroAmerican Services, PetroStar Energy and Treasurer for Reading & Bates Corporation Responsible for raising ~$4 billion in capital B.S. and MBA (University of Tulsa)

27 Our Management Team (cont d) Daryl Mazzanti, VP-Operations Joined team in mid-2005 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 production Responsible for numerous innovations in horizontal drilling, completions and artificial lift B.S. in Petroleum Engineering (University of Oklahoma) Edward Schell, General Manager for Drilling and Unconventional Development 24 years of experience in oil and gas industry Various management positions in drilling, operations and business development at Anadarko Petroleum Particular expertise in horizontal drilling and tight gas reservoirs Drilled ~800 wells, 200 being horizontal and 2/3rds being in unconventional reservoirs B.S. in Petroleum Engineering (University of Texas)

28 Our Board of Directors Robert Herlin, CEO, Director & Co-founder Laird Cagan, Chairman & 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 Group Senior Vice President of Global Business Development Gene Stoever, Director Retired Partner with KPMG Peat Marwick Former SEC Reviewing Partner for KPMG CPA in the State of Texas and member of the AICPA Bill Dozier, Director Former SVP-Business Development for Vintage Petroleum Former SVP-Operations for Vintage Petroleum Formerly in operations for Santa Fe Minerals and Amoco

29 EPM Summary Multiple new development projects offer great upside Growing inventory of proved undeveloped locations Development drilling program spudding by EOY $24+ MM in available cash to support growth no debt Experienced management team with specific expertise in programs and a successful team record Stock value supported by $2.65 per o/s share of available cash + proved reserves, plus bbls of CO2-EOR reserves, plus ongoing development projects