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Evolution Petroleum Corporation (EPM)

F1Q2011 Earnings Call Transcript

November 11, 2010 11:00 am ET


Lisa Elliott – IR, DRG&L

Bob Herlin – CEO


Jason Wangler – Wunderlich Securities

Joel Musante – C.K Cooper & Company

Dick Feldman – Monarch Capital



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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evolution's first quarter fiscal 2011 conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Thursday November 11, 2010.

I would now like to turn the conference over to Lisa Elliott with DRG&L. Please go ahead.

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Lisa Elliott

Thank you operator and good morning, everyone. We appreciate you joining us for Evolution Petroleum's conference call to discuss results of the first quarter of fiscal 2011, which ended September 30.

In a moment, I'll turn the call over to management. But first, I'd like to go over few regular items, if you'd like to be on the company's email distribution list to receive feature, news releases, please let me know, my contact information is in the earnings release that Evolution put out this morning.

And if you wish to listen to the replay of today's call, it will be available in a few hours, an archive for one year via webcast by going to the company's website at or via recorded telephone replay until November 18. Dial-in number and pass code is in the press release we put out this morning.

Information recorded on the call today is valid only as of today, November 11, 2010 and therefore, time-sensitive information that may no longer be accurate as of the date of any replay. And today management is going to discuss certain topics that may contain forward-looking information, which are based on management's belief as well as assumptions made by management and information currently available to them. Forward-looking information includes statements regarding expected future drilling results, production and expenses. Although management believes that expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to be correct. And such statements are subject to certain risks and uncertainties and assumptions, which are listed and described in the company's filings with the Securities and Exchange Commission. If one or those or more of those risks are materialize or should underlying assumptions prove incorrect, actual results may differ materially from those expected.

Also, today's call may include discussions of probable and possible reserve through use of terms like volume reserve, potential or recoverable reserves. Please note that these estimates of non-proved reserves or resources are by their very nature more speculative than estimates of proved resources and accordingly are subject to substantially greater risk.

Now I'd like to turn the call over to Bob Herlin, Evolution Petroleum's Chief Executive Officer. Bob?

Bob Herlin

Thanks, Lisa. Good morning to everyone. Thanks for joining us this morning. Sterling McDonald our CFO is someone under the weather today, but he is not here to participate.

As Lisa had mentioned, we released our first quarter financial operating results this morning. So I'm really just going to review some of the key events and numbers then take questions. In the first quarter, we focused on initiating the drilling in our joint venture program in Giddings Field, by also beginning the fieldwork to assess the high potential and our mid-depth Haskell County, Oklahoma Shale project and further testing our artificial lift technology.

Net production in the quarter was little over 25,000 barrels oil equivalent of about 278 barrels of oil a day, this is down sequentially in year-over-year, due to the normal production decline in the Giddings Field before we start our new drilling. Revenues remained steady sequentially and up year-over-year, due to higher commodity prices in our oil, ore [ph] productions.

Our blended oil and gas price in the first quarter of fiscal '11 was 45.63 per BOE compared to 33.43 per BOE a year ago. Our net loss of $0.02 a share for the first quarter of '11 was an improvement over the $0.03 loss per share of prior year. And included in both these numbers are significant non-cash stock based compensation costs. Major component of our improved financial result was a short decline in DD&A expense.

In the first quarter of the '11, DD&A was only $4.50 per BOE and that's down from $17 per BOE last year, the changes due to an additional of 9.5 million barrels of crude oil reserves at Delhi. Where the legacy cost that we added to full growing $1.2 million. We continue to closely control our cost and manage our cash flow to cover overhead using cash on hand and any residual cash from operations to cover capital expenses – capital cost I should say.

We expect our production and cash flow grow throughout the year, as we bring these new wells in our Giddings JV benefit from expected significant growth in our Delhi production, January, 1st production in the Oklahoma Shale project, which will be able to put to gas sales [ph] and finally get start up [ph] on production.

Now let me walk you through some of the various operations and my project and give you an update. In Delhi, Denbury continues to make good progress rolling out the field to project there. They completed drilling of the initial 20 well program earlier this year and are working to increase CO2 injection rates by installing additional production flow line, injection lines. They expect to have that completed by calendar year end. They anticipate a corresponded increase in production year after in calendar 2011.

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