Evolution Petroleum Corporation, Inc. · AMEX:EPM
Evolution Petroleum — Investor Presentation (April 2012)
36 slides from Evolution Petroleum's investor presentation, Apr 27, 2012
Slide 1: Investor Presentation, May 2012
MAY 2012 INVESTOR PRESENTATION April 27, 2012 New Orleans KKEVOLUTION Petroleum Corporation
Slide 2: Forward-looking statements and cautionary note
The data contained in this presentation that are not historical facts are “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. Such statements may relate to capital expenditures
Slide 3: Four Factors for Repeating Success and Building Value per Share
Four Factors for Repeating Success and Building Value per Share Every Day Innovative Engineering Redeploying Internal Building Cashflows Value per Share Staff Fully Aligned with Shareholders Known Oil Fields 3
Slide 4: Management team: name, background, achievements
Name/Title Background Achievements Robert Herlin Co-founded EPM in 2003 using 30 years leadership experience in M&A, CEO & Chairman $8.3 MM in capital (multiple raises). development, operations and finance in public B.S. and M.E. Chemical Engineering, and private sectors. Rice University. MBA, Harva
Slide 5: Transformed $8.3 MM Investment into $461 MM PV10 + WC
Transformed $8.3 MM Investment into $461 MM PV10 + WC $500 $72 MM $461 MM $400 $375 MM $300 Total Value, $MM $200 $100 $13.6 MM $0 Initial Investment Cash Proved Reserves Probable Reserves Total Value -$100 Notes: (1) Delhi PV10 values based on report from independent reserve engineers, DeGolyer & M
Slide 6: Reserves (84% Oil) and Revenue
Reserves (84% Oil) Revenue (Years ended June 30) MMBoe $M $8,000 25 $7,000 20 $6,000 $5,000 15 $4,000 10 $3,000 $2,000 5 $1,000 0 $0 Proved PUD Probable 6
Slide 7: Quarterly Revenue and Quarterly Net Income
Quarterly Quarterly Net Income Revenue to Common $M $M $5,000 $1,400 $4,500 $4,000 $1,200 $3,500 $1,000 $3,000 $800 $2,500 $2,000 $600 $1,500 $400 $1,000 $500 $200 $0 $0 7
Slide 8: Asset overview: Ms Lime, Delhi, S Lopez, Giddings
Ms Lime – Drilling Begins May 2012 24,000 gross (11,700 net) acres in JV 45% non-op share of JV held by EPM 25-33 net potential oily drilling locations Delhi Field - Producing CO2 EOR - 100% oil 10.9 MMBO Proved 5.8 MMBO Probable S Lopez Field – Producing 41% of 2P is developed producing Vertical re
Slide 9: 13.8 MMBOE Proved Reserves and SEC Pretax PV10
13.8 MMBOE $MM SEC Pretax PV10 Proved Reserves $400 $375.3 $350 5% 11% $300 $266.0 $250 $200 $150 84% $100 $35.8 $50 $0 2009 2010 2011 Oil NGL Natural Gas 9
Slide 10: Application of Strengths to Grow Oil Production, Reserves and Value
Application of Strengths to Grow Oil Production, Reserves and Value
Slide 11: Phases of growth: Positioning for Growth
Phase 4: Phase 3: “Consistent Growth” “Invest for Growth” Ongoing development Delhi and Giddings cash drilling to grow flow reinvested into oil production, reserves Phase 2: projects and and cash flow. “Positioning for GARP™ technology. Growth” Grow the franchise. Delhi net proceeds Growing operatin
Slide 12: Cash redeployed into new oil projects
2012 S. Texas Oil $ Expansion 2013 $ New Cash to be Redeployed Mississippian Lime 2014 Oil Project $ 2015 GARP™ $ 12
Slide 13: Grow Value Per-Share
Oil Weighted Onshore US Engineering Driven HZ Drilling Potential Repeatable Results Known Oil & Gas Fields Grow Value Per-Share 13
Slide 14: Our Foundation Asset: CO2 Enhanced Oil Recovery
Our Foundation Asset CO2 Enhanced Oil Recovery
Slide 15: Low-Risk Cash Flow for Reinvestment into Growth Assets
Low-Risk Cash Flow for Reinvestment into Growth Assets Gross cum production 192 MMBO Current production >5,400 BOPD Jackson Dome 6/30/2011 Reserves 10.9 MMBO Proved 5.8 MMBO Probable Delhi (41% of 2P producing) 30% of 2P from royalty interest & free of exp. Projected EOR recovery 13% Proved (PV10: $
Slide 16: Royalty Interest and Reversionary Working Interest
• EPM receives 7.4% of gross revenues • No Cap Ex or Op Ex…forever 7.4% • Exempt from state severance tax until project payout of all actual Royalty costs plus capital cost Interest • Royalty interest = 30% of total Delhi reserves volumes • Delhi crude priced at LA Light Sweet (premium to WTI) Free
Slide 17: Denbury plans 2012 flood expansion
Denbury plans to invest $64 MM in 2012 to expand flood. Develop three patterns, build additional facilities. 2012E Activity 2009 Activity 2010 Activity 2011 Activity 2011 Activity expansion Source: Denbury Resources Inc. Fall Analyst Meeting, November 14, 2011. 17
Slide 18: Delhi cash flow by royalty and reversionary WI
$MM $80 $70 $60 $50 $40 $30 $20 $10 $- 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Calendar $(10) Royalty Reversionary WI Note: Based on report from independent reserve engineers, DeGolyer & MacNaughton, and includes proved and probable reserves as of 6/30/2011 at SEC pricing of $94.
Slide 19: Remaining PV10 and cumulative pretax
$M $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Remaining PV10 Cum Pretax Notes: Residual PV10 is the PV10 of remaining cash flows from given year to project end. Includes proved and probable reserves
Slide 20: Impact of EOR Recovery and Oil Price on EPM Share Price
Impact of Additional EOR Oil Price Impact Recovery on EPM Share Price on EPM Share Price PV10* vs Gross Oil Recovery PV10* vs 2012 Oil Price $/ diluted share $ / diluted (flat pricing) share $14 $20 2P PV10 Esc @ 3% inflation 2P $13 2P PV10 SEC Flat $16 $12 $12 EPM @$8.96 $11 (4/11/2012) 1P $8 $10 $
Slide 21: Growing Per-Share Value: Growth and Oily Projects
GROWTH & OILY PROJECTS Growing Per-Share Value KKEVOLUTION Petroleum Corporation
Slide 22: Mississippian Lime project selection criteria and terms
Fits selection criteria: Oil-prone, horizontal drilling, onshore U.S., IRR>30%, known oil field, accessible, running room, repeatable Kay County, Oklahoma 24,000 gross (11,700 net to JV) acres Cash and drilling carry for 45% share of JV $3 MM up front cost 25-33 net potential drilling lo
Slide 23: Joint venture acreage east of the Nemaha ridge
Joint venture acreage in oil-prone area, east of the Nemaha ridge. Multi-year visible growth potential for reinvesting early Delhi free cash flow. SD, PQ Spyglass, Vitruvian, Century CHK, Chaparral, EPM Eagle, SDR Calyx, Pablo, PQ, Range, Ram, SDR, Spyglass, Century CHK, SDR, Territory, Vitruvia
Slide 24: Mississippian Lime is well defined by old vertical wells
Mississippian Lime is well Vitruvian defined by old vertical Bowling 2-32H wells IP 500+ Bopd Numerous vertical logs show Spyglass thick, continuous pay Bird Creek 1A-15H Interpretation of well data IP 210 Bopd EPM and logs shows geologic continuity with offset wells Vertical average EURS:
Slide 25: Estimated Mississippian Lime Type Curves by Operator
Estimated Mississippian Lime Type Curves by Operator Assumptions: 350 Range 485 MBOE SDR 486 MBOE EPM JV 268 MBOE EUR: 268 MBOE (75% oil) 300 250 $2.8 MM drilling and 200 BOEPD 150 completion cost 100 Includes SWD facilities 50 0 Rich gas is minor element 0 40 80 Month EPM assumes a declinin
Slide 26: S. Lopez: Mirando sandstone waterflood redevelopment
Mirando sandstone within previous waterflood Moving from test phase into development phase, overcoming ongoing challenges in re-injecting produced water Developing 10-20 BOPD per well of long life, low decline production at a cost of ~$550K per well, or $35K to $68K per net BOPD 3 test produ
Slide 27: Giddings Field: transitional asset
8,560 net acres Net production ~205 BOEPD from ten wells Proved undeveloped reserves in 11 drilling locations Reserves in Georgetown, Austin Chalk and Buda formations Exposure to new Woodbine oil play Transitional asset, evaluating divestment options due to lack of running room to redepl
Slide 28: Innovation for Increasing Recovery
Innovation for Increasing Recovery
Slide 29: GARP technology: recovering the tail
Reestablishes economic production of the “Tail” Supplements & enhances existing rod pump Mobilizes remaining fluid to rod pump inlet Successful applications in Giddings Field Two commercial installations completed & successful, 3rd pending Fee/participation for service model 29
Slide 30: Before: Conventional Rod Pump, After: GARP
BEFORE: Conventional Rod Pump AFTER: GARP™ Either fluid level eventually drops Adds substantial new reserves to a level where at low cost rod pump or gas lift are Benefit = up to 25% incremental no longer effective, or recovery Fluid production in gas well builds Benefit = extends life of
Slide 31: GARP: Synergistic Incremental Recovery
GARP™: SYNERGISTIC INCREMENTAL RECOVERY GIDDINGS FIELD, TX (AUSTIN CHALK) HZ WELL 10000 GARPrmu installation restored production from uneconomic 1.2 bopd to profitable steady level ~y__Gas S 4 “tail” 1000 ZesSs of 7-8 bopd + 21 mcfd_, recapturing lost “tail MCF or Bbls per DAY b 8 S RX > 0 100,000 2
Slide 32: Conservative, Strong and Aligned
Conservative, Strong and Aligned
Slide 33: Debt to Market Cap and Liquidity Sources & Uses
Debt to Market Cap $MM Liquidity – Sources & Uses 45% $25 40% 40% $20 $5 CFFO 35% 33% 30% 29% Availability 26% $15 $5 25% 24% 20% $10 15% 12/31/11 Ms Lime 11% $7 10% $14 W/C $5 5% Current 0% $4 0% $- AREX DNR EPM REN WRES PQ MHR Resources CapEx (2012E) 33
Slide 34: Total Value vs Market Cap, Gap to NAV
$500 $461 MM $400 $212 MM Gap to NAV Total Value, $MM $300 $249 MM $200 $100 $0 Investment Cash Proved Probable Proved Proved Total Market Cap PV10 PV10 PV10 PV10 Value (4/11/12) (3) Delhi (1) Delhi (1) Giddings (2) Lopez -$100 Notes: (1) Delhi PV10 values based on report from independent reserve en
Slide 35: Total Value Per Share
$16 $13.89 $14 $12 $4.93 Total Value Per Share Gap to NAV $10 $8.96 $8 $6 $4 $2 $0 Investment Cash Proved Probable Proved Proved Total Share Price -$2 PV10 PV10 PV10 PV10 Value (4/11/12) Delhi Delhi Giddings Lopez Note: Per-share values are based on 33.2 MM diluted shares.. PV10 from 6/30/11 reserve
Slide 36: Team with track record of growing value per-share
Team with track record of growing value per-share Growing value and cash flow at Delhi foundation asset (100% LLS oil) $212 MM value gap between intrinsic value and market value (or $4.93 per diluted share) New exposure to oily Mississippian Lime play (visible growth potential) – new project
Evolution Petroleum — Investor Presentation (April 2012) on 6ix