HOUSTON, Jan. 6, 2014 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE MKT: EPM) today announced executive changes and additional information regarding its previously announced restructuring of operations.
Retirement of CFO
Vice President, Chief Financial Officer and Treasurer Sterling McDonald, who will turn 65 in 2014, has informed the Company of his intention to retire pending his replacement. Mr. McDonald has served as CFO and Treasurer since 2003 and was the second employee hired by the Company. As such, he played an instrumental part in the outstanding growth of the Company, overseeing the financial, accounting and administrative functions. Mr. McDonald also has been a key member of the executive team that created and executed the strategy that has developed tremendous shareholder wealth. Shareholders, the Board of Directors and staff have greatly benefited from Sterling's contributions and we wish him well in his retirement.
Mr. McDonald commented, "I am very fortunate to have worked with such a fine team in building a great company for our shareholders and creating value well in excess of our original expectations. I am confident that the management team and board of directors will continue Evolution's growth and success going forward."Robert Herlin, Chairman and Chief Executive Officer said, "It has been my distinct pleasure to work with Sterling these last 10 years. His significant and substantial contributions have helped to position the Company for its next stage of development, and I personally thank him for his service and commitment. He will be missed, and we are fortunate to be able to count on him to facilitate the transition to his successor." The Company has engaged a corporate recruiter to assist in identifying candidates to replace Mr. McDonald with an emphasis on oilfield services experience to help further commercialize its growing artificial lift technology business segment. Mr. McDonald will continue his present duties until his successor has been identified and elected by the Board of Directors to fill the roles of Chief Financial Officer and Principal Accounting Officer, which is expected to occur in January 2014. Mr. McDonald will be available to the Company as needed during its transition period. Promotion of New Officer In addition and as part of the recent restructuring of operations, the Board of Directors has elected David Joe, the current Controller and Corporate Secretary, to the additional positions of Vice President and Chief Administrative Officer. Mr. Joe joined the Company in 2005 and since then has been a key member of the management team. Restructuring Detail The Company previously announced an operational restructuring in November 2013 that focuses on two core assets: the Delhi Field CO 2 enhanced oil recovery project and the Company's patented GARP® artificial lift technology. As part of this effort, the Company completed the divestment of all of its remaining non-GARP® operated properties in December 2013. Accordingly, three members of the operations staff left the Company as of December 31, 2013. Under the severance policy adopted for the restructuring, the departing employees were provided severance in the amount of one year's cash compensation payable over twelve months and acceleration of unvested restricted stock awarded from 2010 through 2012. The same benefits are being provided to Mr. McDonald upon his retirement. These costs will be charged to the fiscal quarter ending December 31, 2013 and are estimated to be approximately $2.0 million pre-tax, of which $0.6 million will be noncash expense. As previously disclosed, employees and directors exercised more than 4 million of 4.8 million performance stock options and warrants awarded from 2004 through 2008, creating approximately $31 million of tax deductions that permanently reduce current and future taxable income up to such amount (the "Deductions"). A portion of the Deductions is expected to apply to fiscal 2014 tax year ending June 30, 2014. In addition to the permanent tax savings, the Deductions may cause recent and near-term cash distributions to shareholders to be treated as return of capital. On a financial reporting basis, the Deductions will be recorded as a reduction in current income taxes payable each year, offset by an increase in equity, in amounts equal to the cash taxes payable prior to the effect of the Deductions. The Deductions will only impact reported earnings by increasing the projected effective tax rate closer to the statutory rate in those years affected by the Deductions due to the percentage depletion deduction being delayed and carried forward.