Evolution Petroleum Increases Common Stock Dividend by 30%; Announces Operating Results for Quarter Ended September 30, 2016
- 33
HOUSTON, TX / ACCESSWIRE / November 7, 2016 / Evolution Petroleum Corporation (NYSE MKT: EPM) announced today that its Board of Directors increased the quarterly cash dividend to common shareholders by 30%, to $0.065 per share, a rate of $0.26 per share on an annualized basis. The quarterly dividend will be payable on December 30, 2016 to shareholders of record as of the close of business on December 15, 2016.
EPM also reported financial and operating highlights for its fiscal first quarter ended September 30, 2016, with comparisons to the fiscal fourth quarter ended June 30, 2016 (the "prior quarter") and the quarter ended September 30, 2015 (the "year-ago quarter").
Highlights:
- We reported net income of $1.8 million in the current quarter. Our net income to common shareholders was $0.6 million, or $0.02 per share, which includes a nonrecurring, noncash deemed dividend of $1.0 million related to the redemption of our preferred stock and $0.3 million of final dividends on the preferred stock, or $0.04 per share in the aggregate.
- We paid our twelfth consecutive quarterly cash dividend on common shares and announced a 30% increase in the dividend for the next quarter.
- Gross production in the Delhi field increased 5.8% over the prior quarter, to 7,371 barrels of oil equivalent per day ("BOEPD") from 6,964 BOEPD, primarily from conformance and production enhancement operations. This production does not yet include expected volumes from the new Delhi NGL plant, which is scheduled for completion and start-up by the end of the calendar year.
- Our net production increased to 1,935 BOEPD after a small 0.2% (.002) adjustment to our net revenue interest from the June 2016 litigation settlement. Our average realized price per equivalent barrel was $42.66, down slightly from the $42.87 average price in the prior quarter.
- We announced the redemption of all of our 8.5% Series A Cumulative Preferred Stock. Annual preferred dividend savings will amount to $674,302 per year, or $0.02 per common share.
- We ended the quarter with $19.6 million of working capital, substantially all of which was cash, after reduction for the $7.9 million commitment to retire our preferred stock. We remain debt free.
Randy Keys, President and CEO, said: "The decisions to redeem our preferred stock and increase the common stock dividend reflect our consistent focus on delivering value to our common shareholders. Our balance sheet strength, with almost $20 million of net cash, combined with the end of the capital spending on the NGL plant, the anticipated increase in field cash flow and the outstanding performance of the Delhi field, gives us the confidence to increase the dividend at this time. The Board of Directors plans to again review the dividend in 2017 based on results from the NGL plant start-up and the future outlook for crude oil prices. We ended the past fiscal year with our best financial position since this industry downturn began two years ago, and our financial position and outlook have only improved during the quarter."
Results for the Quarter Ended September 30, 2016
The Delhi field continued to perform very well during the quarter, with gross production up by over 400 BOEPD from the prior quarter to 7,371 BOEPD. This production growth resulted from work to improve the performance of the CO2 flood through selective conformance efforts and other relatively low cost production enhancement projects. This increasing production trend is a very favorable indicator for the long-term reserve recovery from the Delhi field.
In the current quarter, we reported operating revenues of $7.6 million, based on an average realized oil price of $42.66 per barrel, and generated $2.7 million in income from operations. In the prior quarter, we reported $1.0 million in income from operations on revenues of $7.2 million, which was based on an average oil price of $42.87 per barrel. Production volumes increased to 1,935 BOEPD from 1,856 BOEPD in the prior quarter and were substantially above the year-ago quarter rate of 1,745 BOEPD. Quarterly net income to common shareholders was $0.6 million, or $0.02 per diluted share, which includes a nonrecurring, noncash deemed dividend of $1.0 million related to the redemption of our preferred stock and $0.3 million of final dividends on the preferred stock, or $0.04 per share in the aggregate. On a pro forma basis, assuming the redemption of the preferred stock had occurred prior to the current quarter, our net income to common shareholders would have been $1.8 million, or $0.06 per share.
Production costs in the Delhi field increased 15.4% from $2.0 million in the prior quarter to $2.3 million in the current quarter, primarily as a result of higher volumes of purchased CO2. Total CO2 injection volumes increased during the summer, with a corresponding increase in purchased volumes. Our cost of purchased CO2 is tied directly to realized oil prices in the field, so our cost per Mcf was largely unchanged from quarter to quarter.
Depletion, depreciation and amortization expense increased slightly to $1.3 million from $1.2 million in the prior quarter on increased production and sales volumes. The DD&A rate per barrel did not change significantly for these periods.
Our general and administrative expenses were $1.2 million for the quarter, of which $0.3 million were stock-based compensation expenses and approximately $0.9 million were cash costs. These amounts represent a substantial decrease over the prior quarter and year-ago quarter, and are in line with our expectations for lower G&A costs after the litigation settlement and the separation of our artificial lift technology operations in late 2015. The Company has always maintained a consistent focus on cost control, but we have made significant cost reductions over the past three years as we have streamlined and focused the organization during this downturn.
Delhi Capital Spending
Construction of the Delhi natural gas liquids ("NGLs") recovery plant was completed in late October, and startup testing is scheduled to begin this month. We expect the NGL plant to deliver significant production growth from new NGL volumes in the field shortly after the end of the year. In addition, with an expected improvement in efficiency of the CO2 flood from removal of methane and NGLs from the CO2 recycle stream, we are also expecting an increase in yearly crude oil production. As of September 30, 2016, we had incurred $23.9 million of costs on the NGL plant out of an original budget of approximately $25 million net to the Company. The completed cost of the project is expected to be largely within the original budget.
In late September and October, we approved eleven small capital workover projects for continuing conformance operations in the Delhi field, totaling approximately $3.8 million ($0.9 million net to us). There are three workover rigs operating in the field and we expect all of these operations to be completed by the end of the year. These new projects result from the demonstrated benefits from previous conformance efforts and the significant returns that have been realized from relatively modest capital investments in the field. These conformance projects add production and cash flow in a very short time frame after investment.
Liquidity and Capital Resources
Our liquidity position remains excellent, with $19.6 million of net working capital (after accrual of $7.9 million for the redemption of preferred stock), $10.0 million of undrawn liquidity under our reserve-based credit facility and the expectation of significant free cash flow over the next twelve months. Our future cash flow is dependent on the prices we receive for our production. Based on our solid financial position, we expect to continue our quarterly common stock cash dividend program for the foreseeable future.
Southwest IDEAS Investor Conference
Evolution also announces that Randy Keys, President and CEO of Evolution, will present at the Southwest IDEAS Investor Conference on Wednesday, November 16, 2016 at the InterContinental Hotel in Dallas, Texas. The Company's presentation is scheduled to begin at 8:40 a.m. Central (9:40 a.m. Eastern).
The presentation will be webcast live and may be accessed at the conference website, www.threepartadvisors.com/southwest-ideas. It will also be available on the Company's website, www.evolutionpetroleum.com.
Conference Call
As previously announced, Evolution Petroleum will host a conference call on Tuesday, November 8, 2016 at 11:00 a.m. Eastern (10:00 a.m. Central) to discuss results. To access the call, please dial 1-855-327-6837 (US and Canada) or 1-631-891-4304 (International). To listen live or hear a rebroadcast, please go to http://www.EvolutionPetroleum.com. A replay will be available two hours after the end of the conference call through November 15, 2016 by calling 1-844-512-2921 (US and Canada) or 1-412-317-6671 (International) and providing the replay pin number of 10001875.
About Evolution Petroleum
Evolution Petroleum Corporation develops petroleum reserves and shareholder value by applying conventional and specialized technology to known oil and gas resources, onshore in the United States. Our principal asset is our interest in a CO2 enhanced oil recovery project in Louisiana's Delhi Field. Additional information, including the Company's most recent annual report on Form 10-K and its quarterly reports on Form 10-Q, is available on its website at www.EvolutionPetroleum.com.
Cautionary Statement
All forward-looking statements contained in this press release regarding potential results and future plans and objectives of the Company involve a wide range risks and uncertainties. Statements herein using words such as "believe," "expect," "plans" and words of similar meaning are forward-looking statements. Although our expectations are based on engineering, geological, financial and operating assumptions that we believe to be reasonable, many factors could cause actual results to differ materially from our expectations and we can give no assurance that our goals will be achieved. These factors and others are detailed under the heading "Risk Factors" and elsewhere in our periodic documents filed with the SEC. The Company undertakes no obligation to update any forward-looking statement.
Company Contact:
Randy Keys, President & CEO
(713) 935-0122
[email protected]
|
Three Months Ended
|
||||||||||||
|
September 30,
|
June 30,
|
|||||||||||
|
2016
|
2015
|
2016
|
||||||||||
|
Revenues
|
||||||||||||
|
Crude oil
|
$ | 7,593,855 | $ | 7,325,813 | $ | 7,233,190 | ||||||
|
Natural gas liquids
|
89 | 1,050 | 5,553 | |||||||||
|
Natural gas
|
(4 | ) | 704 | 1,691 | ||||||||
|
Artificial lift technology services
|
- | 51,839 | - | |||||||||
|
Total revenues
|
7,593,940 | 7,379,406 | 7,240,434 | |||||||||
|
Operating costs
|
||||||||||||
|
Production costs
|
2,344,641 | 2,608,579 | 2,031,642 | |||||||||
|
Cost of artificial lift technology services
|
- | 9,868 | - | |||||||||
|
Depreciation, depletion and amortization
|
1,273,439 | 1,218,273 | 1,206,476 | |||||||||
|
Accretion of discount on asset retirement obligations
|
13,224 | 11,343 | 14,499 | |||||||||
|
General and administrative expenses *
|
1,235,043 | 1,684,845 | 3,032,994 | |||||||||
|
Total operating costs
|
4,866,347 | 5,532,908 | 6,285,611 | |||||||||
|
Income from operations
|
2,727,593 | 1,846,498 | 954,823 | |||||||||
|
Other
|
||||||||||||
|
Gain on realized derivative instruments, net
|
90 | 866,427 | (644,936 | ) | ||||||||
|
Gain (loss) on unrealized derivative instruments, net
|
(14,132 | ) | 1,071,962 | 4,427 | ||||||||
|
Delhi field litigation settlement
|
- | - | 28,096,500 | |||||||||
|
Delhi field insurance recovery related to pre-reversion event
|
- | 1,074,957 | - | |||||||||
|
Interest and other income
|
12,745 | 5,812 | 2,695 | |||||||||
|
Interest expense
|
(20,345 | ) | (18,460 | ) | (19,781 | ) | ||||||
|
Income before income taxes
|
2,705,951 | 4,847,196 | 28,393,728 | |||||||||
|
Income tax provision
|
889,176 | 1,754,969 | 7,519,258 | |||||||||
|
Net income attributable to the Company
|
1,816,775 | 3,092,227 | 20,874,470 | |||||||||
|
Dividends on preferred stock
|
250,990 | 168,575 | 168,576 | |||||||||
|
Deemed dividend on preferred shares called for redemption
|
1,002,440 | - | - | |||||||||
|
Net income available to common stockholders
|
$ | 563,345 | $ | 2,923,652 | $ | 20,705,894 | ||||||
|
Earnings per common share
|
||||||||||||
|
Basic
|
$ | 0.02 | $ | 0.09 | $ | 0.63 | ||||||
|
Diluted
|
$ | 0.02 | $ | 0.09 | $ | 0.63 | ||||||
|
Weighted average number of common shares
|
||||||||||||
|
Basic
|
32,957,010 | 32,718,244 | 32,904,481 | |||||||||
|
Diluted
|
33,007,599 | 32,774,176 | 32,964,109 | |||||||||
* General and administrative expenses for the three months ended September 30, 2016, September 30, 2015 and June 30, 2016 included non-cash stock-based compensation expenses of $311,688, $218,115 and $1,041,463, respectively. These quarters also respectively included $28,129, $306,357 and $646,931 of litigation expenses.
Evolution Petroleum Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Unaudited)
|
September 30,
2016 |
June 30,
2016 |
|||||||
|
Assets
|
||||||||
|
Current assets
|
||||||||
|
Cash and cash equivalents
|
$ | 28,236,711 | $ | 34,077,060 | ||||
|
Receivables
|
2,518,470 | 2,638,188 | ||||||
|
Deferred tax asset
|
- | 105,321 | ||||||
|
Derivative assets, net
|
- | 14,132 | ||||||
|
Prepaid expenses and other current assets
|
273,114 | 251,749 | ||||||
|
Total current assets
|
31,028,295 | 37,086,450 | ||||||
|
Oil and natural gas property and equipment, net (full-cost method of accounting)
|
61,451,021 | 59,970,463 | ||||||
|
Other property and equipment, net
|
50,585 | 28,649 | ||||||
|
Total property and equipment
|
61,501,606 | 59,999,112 | ||||||
|
Other assets
|
348,014 | 365,489 | ||||||
|
Total assets
|
$ | 92,877,915 | $ | 97,451,051 | ||||
|
Liabilities and Stockholders' Equity
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable
|
$ | 2,509,041 | $ | 5,809,107 | ||||
|
Preferred shares called for redemption
|
7,932,975 | - | ||||||
|
Accrued liabilities and other
|
839,313 | 2,097,951 | ||||||
|
State and federal income taxes payable
|
97,078 | 621,850 | ||||||
|
Total current liabilities
|
11,378,407 | 8,528,908 | ||||||
|
Long term liabilities
|
||||||||
|
Deferred income taxes
|
12,444,045 | 11,840,693 | ||||||
|
Asset retirement obligations
|
772,175 | 760,300 | ||||||
|
Total liabilities
|
24,594,627 | 21,129,901 | ||||||
|
Commitments and contingencies (Note 15)
|
||||||||
|
Stockholders' equity
|
||||||||
|
Preferred stock, par value $0.001; 5,000,000 shares authorized:8.5% Series A Cumulative Preferred Stock, 1,000,000 shares designated, 317,319 shares issued and outstanding at September 30, 2016 and June 30, 2016; with a liquidation preference of $7,932,975; called for redemption at September 30, 2016 (Note 8)
|
- | 317 | ||||||
|
Common stock; par value $0.001; 100,000,000 shares authorized: issued and outstanding 33,045,515 shares and 32,907,863 as of September 30, 2016 and June 30, 2016, respectively
|
33,045 | 32,907 | ||||||
|
Additional paid-in capital
|
40,222,825 | 47,171,563 | ||||||
|
Retained earnings
|
28,027,418 | 29,116,363 | ||||||
|
Total stockholders' equity
|
68,283,288 | 76,321,150 | ||||||
|
Total liabilities and stockholders' equity
|
$ | 92,877,915 | $ | 97,451,051 | ||||
|
Three Months Ended
September 30,
|
||||||||
|
2016
|
2015
|
|||||||
|
Cash flows from operating activities
|
||||||||
|
Net income attributable to the Company
|
$ | 1,816,775 | $ | 3,092,227 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation, depletion and amortization
|
1,287,523 | 1,230,432 | ||||||
|
Stock-based compensation
|
311,688 | 218,115 | ||||||
|
Accretion of discount on asset retirement obligations
|
13,224 | 11,343 | ||||||
|
Settlements of asset retirement obligations
|
(15,899 | ) | - | |||||
|
Deferred income taxes
|
708,673 | (12,568 | ) | |||||
|
(Gain) loss on derivative instruments, net
|
14,042 | (1,938,389 | ) | |||||
|
Write-off of deferred loan costs
|
- | 50,414 | ||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Receivables
|
119,808 | 757,617 | ||||||
|
Prepaid expenses and other current assets
|
(21,365 | ) | 47,815 | |||||
|
Accounts payable and accrued expenses
|
(2,235,240 | ) | (1,563,847 | ) | ||||
|
Income taxes payable
|
(524,772 | ) | 343,704 | |||||
|
Net cash provided by operating activities
|
1,474,457 | 2,236,863 | ||||||
|
Cash flows from investing activities
|
||||||||
|
Derivative settlement payments (paid) received
|
(318,708 | ) | 551,772 | |||||
|
Capital expenditures for oil and natural gas properties
|
(4,818,816 | ) | (6,571,757 | ) | ||||
|
Capital expenditures for other property and equipment
|
(26,347 | ) | - | |||||
|
Other assets
|
- | (23,802 | ) | |||||
|
Net cash used in investing activities
|
(5,163,871 | (6,043,787 | ) | |||||
|
Cash flows from financing activities
|
||||||||
|
Cash dividends to preferred stockholders
|
(168,575 | ) | (168,575 | ) | ||||
|
Cash dividends to common stockholders
|
(1,652,290 | ) | (1,629,703 | ) | ||||
|
Common share repurchases, including shares surrendered for tax withholding
|
(330,070 | ) | (1,175,920 | ) | ||||
|
Tax benefits related to stock-based compensation
|
- | 2,980,832 | ||||||
|
Other
|
- | (1,276 | ) | |||||
|
Net cash (used) provided by financing activities
|
(2,150,935 | ) | 5,358 | |||||
|
Net decrease in cash and cash equivalents
|
(5,840,349 | ) | (3,801,566 | ) | ||||
|
Cash and cash equivalents, beginning of period
|
34,077,060 | 20,118,757 | ||||||
|
Cash and cash equivalents, end of period
|
$ | 28,236,711 | $ | 16,317,191 | ||||
|
Supplemental disclosures of cash flow information:
|
Three Months Ended
September 30,
|
|||||||
|
2016
|
2015
|
|||||||
|
Income taxes paid
|
$ | 787,366 | $ | - | ||||
|
Louisiana carryback income tax refund and related interest received
|
- | 1,556,999 | ||||||
|
Non-cash transactions:
|
||||||||
|
Change in accounts payable used to acquire property and equipment
|
(2,030,485 | ) | (4,072,935 | ) | ||||
|
Accrued redemption of called preferred shares
|
7,932,975 | - | ||||||
|
Accrued preferred dividends through redemption date
|
82,415 | - | ||||||
|
Deferred loan costs charged to oil and gas property costs
|
- | 108,472 | ||||||
|
Settlement of accrued treasury stock purchases
|
- | (170,283 | ) | |||||
Supplemental Information on Oil and Natural Gas Operations (Unaudited)
|
Three Months Ended September 30,
|
||||||||||||||||
|
2016
|
2015
|
Variance
|
Variance %
|
|||||||||||||
|
Oil and gas production:
|
||||||||||||||||
|
Crude oil revenues
|
$ | 7,593,855 | $ | 7,325,813 | $ | 268,042 | 3.7 | % | ||||||||
|
NGL revenues
|
89 | 1,050 | (961 | ) |
n.m.
|
|||||||||||
|
Natural gas revenues
|
(4 | ) | 704 | (708 | ) |
n.m.
|
||||||||||
|
Total revenues
|
$ | 7,593,940 | $ | 7,327,567 | $ | 266,373 | 3.6 | % | ||||||||
|
Crude oil volumes (Bbl)
|
178,002 | 156,916 | 21,086 | 13.4 | % | |||||||||||
|
NGL volumes (Bbl)
|
4 | 82 | (78 | ) |
n.m.
|
|||||||||||
|
Natural gas volumes (Mcf)
|
16 | 307 | (291 | ) |
n.m.
|
|||||||||||
|
Equivalent volumes (BOE)
|
178,009 | 157,049 | 20,960 | 13.3 | % | |||||||||||
|
Equivalent volumes per day (BOE/D)
|
1,935 | 1,745 | 190 | 10.9 | % | |||||||||||
|
Crude oil price per Bbl
|
$ | 42.66 | $ | 46.69 | $ | (4.03 | ) | (8.6 | )% | |||||||
|
NGL price per Bbl
|
22.25 | 12.80 | 9.45 | 73.8 | % | |||||||||||
|
Natural gas price per Mcf
|
(0.25 | ) | 2.29 | (2.54 | ) | n. | m. | |||||||||
|
Equivalent price per BOE
|
$ | 42.66 | $ | 46.66 | $ | (4.00 | ) | (8.6 | )% | |||||||
|
CO2 costs
|
$ | 1,078,133 | $ | 1,388,926 | $ | (310,793 | ) | (22.4 | )% | |||||||
|
All other lease operating expense
|
1,266,508 | 1,219,653 | 46,855 | 3.8 | % | |||||||||||
|
Production costs
|
$ | 2,344,641 | $ | 2,608,579 | $ | (263,938 | ) | (10.1 | )% | |||||||
|
Production costs per BOE
|
$ | 13.17 | $ | 16.61 | $ | (3.44 | ) | (20.7 | )% | |||||||
|
CO2 volumes mcf per day, gross
|
73,747 | 89,705 | (15,958 | ) | (17.8 | )% | ||||||||||
|
Oil and gas DD&A (a)
|
$ | 1,265,637 | $ | 1,188,872 | $ | 76,765 | 6.5 | % | ||||||||
|
Oil and gas DD&A per BOE
|
$ | 7.11 | $ | 7.57 | $ | (0.46 | ) | (6.1 | )% | |||||||
|
Artificial lift technology services:
|
||||||||||||||||
|
Services revenues
|
$ | - | $ | 51,839 | $ | (51,839 | ) |
n.m.
|
||||||||
|
Cost of service
|
- | 9,868 | (9,868 | ) |
n.m.
|
|||||||||||
|
Depreciation and amortization expense
|
$ | - | $ | 25,384 | $ | (25,384 | ) |
n.m.
|
||||||||
Supplemental Information on Oil and Natural Gas Operations (Unaudited)
|
Three Months Ended
|
||||||||||||||||
|
Sept. 30, 2016
|
June 30, 2016
|
Variance
|
Variance %
|
|||||||||||||
|
Oil and gas production:
|
||||||||||||||||
|
Crude oil revenues
|
$ | 7,593,855 | $ | 7,233,190 | $ | 360,665 | 5.0 | % | ||||||||
|
NGL revenues
|
89 | 5,553 | (5,464 | ) |
n.m.
|
|||||||||||
|
Natural gas revenues
|
(4 | ) | 1,691 | (1,695 | ) |
n.m.
|
||||||||||
|
Total revenues
|
$ | 7,593,940 | $ | 7,240,434 | $ | 353,506 | 4.9 | % | ||||||||
|
Crude oil volumes (Bbl)
|
178,002 | 168,397 | 9,605 | 5.7 | % | |||||||||||
|
NGL volumes (Bbl)
|
4 | 320 | (316 | ) |
n.m.
|
|||||||||||
|
Natural gas volumes (Mcf)
|
16 | 986 | (970 | ) |
n.m.
|
|||||||||||
|
Equivalent volumes (BOE)
|
178,009 | 168,881 | 9,128 | 5.4 | % | |||||||||||
|
Equivalent volumes per day (BOE/D)
|
1,935 | 1,856 | 79 | 4.3 | % | |||||||||||
|
Crude oil price per Bbl
|
$ | 42.66 | $ | 42.95 | $ | (0.29 | ) | (0.7 | )% | |||||||
|
NGL price per Bbl
|
22.25 | 17.35 | 4.90 |
n.m.
|
||||||||||||
|
Natural gas price per Mcf
|
(0.25 | ) | 1.72 | (1.97 | ) |
n.m.
|
||||||||||
|
Equivalent price per BOE
|
$ | 42.66 | 42.87 | $ | (0.21 | ) | (0.5 | )% | ||||||||
|
CO2 costs
|
$ | 1,078,133 | $ | 852,862 | $ | 225,271 | 26.4 | % | ||||||||
|
All other lease operating expense
|
1,266,508 | 1,178,780 | 87,728 | 7.4 | % | |||||||||||
|
Production costs
|
$ | 2,344,641 | $ | 2,031,642 | $ | 312,999 | 15.4 | % | ||||||||
|
Production costs per BOE
|
$ | 13.17 | $ | 12.03 | $ | 1.14 | 9.5 | % | ||||||||
|
CO2 volumes mcf per day, gross
|
73,747 | 58,727 | 15,020 | 25.6 | % | |||||||||||
|
Oil and gas DD&A (a)
|
$ | 1,265,637 | $ | 1,200,737 | $ | 64,900 | 5.4 | % | ||||||||
|
Oil and gas DD&A per BOE
|
$ | 7.11 | $ | 7.11 | $ | - | - | % | ||||||||
SOURCE: Evolution Petroleum Corporation
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