Evolution Petroleum Corporation Corporate Presentation August 2018 Corporate Presentation August 2018

Transcription

1 Evolution Petroleum Corporation Corporate Presentation August 2018 Corporate Presentation August

2 Forward Looking 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 other 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 regarding Oil and Gas Reserves 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. 2

3 Texas / Gulf Coast Focus Overview New York Stock Exchange Shares Outstanding EPM 33.1 MM Share Price (8/13/2018) $10.00 Delhi Field Total Equity Value (8/13/2018) $331 MM Common Stock Dividend (Annualized Rate) $0.40 per share EPM Houston Headquarters Dividend Yield (8/13/2018) 4.0% (Quarter ending 6/30/18) Delhi Gross Liquids Production (86% Oil) ~7,500 BOEPD EPM Net Liquids Production ~1,980 BOEPD Evolution Petroleum co-founded in 2003 by Robert Herlin, Executive Chairman Delhi Field acquired in 2003 Delhi Field CO 2 Project initiated in 2006 with first production in 2010 with expansion ongoing 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 (6/30/18) $27.7 MM ($0.84/Shr) Debt ($40 MM+ Avail Capacity) $0.0 3

4 Investment Considerations High Quality, Long-lived Asset Base Steady cash flow from large Delhi Field resource 20+ year life Potential production additions from continuing development 12 well Delhi infill drilling program commenced March 2018 Phase V scheduled for 2019/20 Upside unquantified potential by extending CO 2 flood to other reservoirs utilizing existing recycle and NGL plants Solid Financial Position $27.7 million cash as of 6/30/18, no 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 4.0% as of 8/13/18 4

5 Directly benefit our shareholders by distributing ~40-50% of 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 Core Objectives 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 5

6 EPM Dividend History vs WTI Oil Prices $0.14 $0.12 $0.10 Cumulative Payout Dec 2013 thru June 2018: $46.1 MM (or $1.41 per share) Sept-18 Dividend declared at $0.10 $140 $120 $100 Quarterly Dividend Rate per Share $0.08 $0.06 $80 $60 WTI Avg Oil Prices (Bloomberg) $0.04 $40 $0.02 $20 $0.00 $- Common Stock Dividends WTI Oil Prices (Qtr Avg) 6

7 Summary Financial Statements March 31, 2018 Amounts in $000 s, except EPS Balance Sheet Cash $ 27,186 Other current assets 4,633 Property and equipment, net 59,624 Other assets 243 Total assets $ 91,686 Current liabilities $ 3,415 Long-term debt -- Deferred taxes and ARO 12,073 Stockholders equity 76,198 Total liabilities and equity $ 91,686 Income Statement (Nine Months Fiscal YTD) Delhi field revenues $ 29,854 Lease operating expenses 9,167 DD&A and accretion 4,580 G&A expenses and other 5,078 Income before income taxes $ 11,010 Income tax (benefit) (4,076) Net income $ 15,086 Earnings per share (fully diluted) $

8 $Million Corporate Presentation August 2018 Seven Consecutive Years of Net Income $40 $35 $30 Revenues Net Income $25 (a) $20 $15 (b) $10 $5 $0 (a) Includes Litigation Settlement (b) Includes Tax Reform YTD 3 Quarters 8

9 Delhi Field Recycle Facility and NGL Plant Delhi Field CO 2 Flood 7,500 BOE per day ~86% premium Louisiana Light Sweet (LLS) oil, connected by pipe to market 3 trains of processing of recycle gas NGL plant on line Dec 2016, recovers heavy NGLs earning ~57% of WTI price net of T&F 9

10 Unquantified Future Expansion Phase III 2011 Phase II Exceptional resource: 418 MMBO of gross original oil in place 325 MMBO gross OOIP in current proved flood area 195 MMBO gross production prior to EOR 17 MMBO gross produced from CO 2 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 over 20 years, and unproved reserves extend life by additional 20 years. Current realized oil price ~$67+/BO Over 13,600 gross acres in units held by production Delhi Field EOR Project Infill Drilling in Phases I & II Phase I Phase IV Phase V 2019/ PUD PUD Infill Pgm Town of Delhi Delhi Unit 12+ miles long Unquantified future expansion in downdip thinner reservoirs & eastern phase dependent on oil price 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 substantial 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 10

11 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 Corporate Presentation August 2018 Delhi Field Daily Production (Tertiary) Gross and Net BOE per Day 10,000 First production from CO 2 flood Infill Drilling Program, Conformance & NGL plant Infill Drilling 2018 Program Phase V 2019/20 BOEPD 1,000 WI & Royalty Interests Reversion of Working Interest in Nov 2014 Royalty Interests Only 100 Gross BOEPD Total Net BOEPD 11

12 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% (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 12

13 Delhi Revenue and Field Operating Margin per BOE (YE June 30) $70 $60 $50 $40 Rev / BOE $61.52 (69% of Rev) $39.71 $44.88 $49.53 $30 $20 (65% of Rev) (69% of Rev) (69% of Rev) $10 $- YE Jun 2015 YE Jun 2016 YE Jun 2017 FYTD Mar 2018 LOE CO2 Costs Field Operating Margin Field Operating Margins of $42.52 (2015), $25.95 (2016), $30.78 (2017) and $36.59 (YTD Mar 2018), respectively 13

14 $8,000 Delhi Field Capital Spending* by EPM ($000 s) (FY 2018 amounts unaudited) $7,000 $6,000 $5,359 $5,000 $4,000 $3,000 $2,000 $2,292 $2,397 $1,866 $3,142 $2,260 $1,000 Prelim Forecast $0 FY 2015 FY 2016 FY 2017 Q1-Q3 FY 2018 Q4 FY H 2019e Well Integrity Field Enhancement Facilities/Other New Drilling * Chart excludes NGL Plant net capex of ~$27 MM 14

15 6/30/18 Proved Reserves, BOE Reserve Reports Prepared by DeGolyer and MacNaughton 1,798, , ,031 6,291,850 78% Developed Proved Reserves based on 14.4% incremental CO 2 recovery (up from 13.0% in 2015). Probable* and Possible* Reserves based on better recovery PUD Infill Drilling Program in Wells (~$2.8 MM net in FY18) Dev Oil Undev Oil Dev NGL Undev NGL Remaining PUD net costs for Infill Program and Phase V are ~$12.8 MM, or $6.15 per BOE 6/30/18 Probable Reserves*, BOE 6/30/18 Possible Reserves*, BOE 493, ,588 3,123, , ,212 77,057 * Probable and Possible reserves involve considerably more risk of recovery than proved reserves see cautionary note page 2 757,178 3,458,331 80% Developed 88% Developed 15

16 Delhi NGL Plant Producing ~1,050 bbls of NGL s per day NGL Plant online Dec 2016 Operating at effective capacity GE turbine also at capacity Fueled by field natural gas Replaces purchased electrical power NGL avg price ~57% of WTI in FY-18, net of deduction of transportation and fractionation charges Very Rich NGL Mix (ITD): NGL Component % of Stream Ethane 2% Propane 25% Butanes (ISO + Normal) 32% Pentanes Plus (C5+) 41% Total 100.0% 16

17 Multiple Projects To Build Long-Term Value Maintain/improve Delhi production & improve EOR efficiency through conformance projects & possible separation of C5+ from NGLs Delhi infill drilling program Expansion of Delhi CO 2 flood to eastern part of field (Phase V) Expand Delhi CO 2 flood to Mengel Unit, additional thinner reservoirs and eastern Phase VI, subject to oil price 17

18 Management and Directors (Average BOD Tenure 11 Years / Insiders Own ~9%*) Robert Herlin Chairman & Interim CEO, co-founder David Joe CFO (13 Years w/epm), previously with Unocal Steve Hicks SVP of Engineering, 38 years industry experience and 20 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 Gene Stoever Former KPMG Audit Partner * Insider holdings cited do not include those of JVL Advisors funds not managed by Mr. Loyd 18

19 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 19

20 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 riskadjusted basis Transactions are appropriate for the size and capabilities of Evolution, and Transactions are supportive of the Company s cash dividend 20

21 Value Proposition High Quality, Long-lived Asset Base Substantial, low decline cash flow from Delhi Field 20+ year life Potential production additions from continuing development 12 well Delhi infill drilling program commenced March 2018 Phase V scheduled for 2019/20 Upside unquantified potential by extending CO 2 flood to other reservoirs utilizing existing recycle and NGL plants Solid Financial Position $27.7 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 4.0% as of 8/13/18 21

22 Contact Information Evolution Petroleum Corporation 1155 Dairy Ashford Rd, Suite 425 Houston, Tx Robert Herlin, Executive Chairman David Joe, SVP & CFO 22