Evolution Petroleum Corporation (EPM) F3Q10 Earnings Call May 12, 2010 11:00 am ET Executives Lisa Elliott – DRG&A Robert S. Herlin – Chairman of the Board & Chief Executive Officer Sterling H. McDonald – Chief Financial Officer Analysts Phil McPherson – Global Hunter Securities Richard Rossi – Wunderlich Securities Joseph Dancy – LSGI Advisors, Inc. Presentation Operator
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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. Such statements are subject to certain risks and uncertainties which are listed and described in the company’s filings with the Securities & Exchange Commission. If one of more of these risks do materialize or should underlying assumptions prove incorrect, actual results may differ materially from those expected.Also, today’s call may include discussion of probable or possible reserves. We use terms like volume, reserve potential, recoverable reserves. The SEC generally only allows disclosure of proved reserves on securities filings and these estimates of non-proved reserves or resources by their very nature are more speculative than estimates of proved resources and accordingly are subject to certain substantially greater risks. Now, with that I’d like to turn the call over to Bob Herlin, Evolution’s Chief Executive Officer. Robert S. Herlin Sterling McDonald, our CFO is here and will provide details on the financial results and answer related questions later in the call. Hopefully, you’ve had a chance to view the press release that we put out this morning and the numbers so we really don’t plan on going in to great detail on these opening remarks but will certainly consider any questions you might have later. First, what I would like to do is update you on our operations out in the field. At the Delhi Field we continue to make progress and the second phase of a five phase field roll out of that CO2 based enhanced oil recovery project. As previously announced in March the field averaged about 240 barrels per day of oil per day of gross sales even thought production began around mid month in March.
Now, during April gross sales averaged an estimated 886 barrels per day in the field which is about 65 barrels a day net to Evolution. All of that is going to our overriding royalty interest and all the production is coming from just the first few oil producing wells. Ultimately, the project is going to include over 200 wells, half of which would be producers.We initially receive our revenue for the project through our 7.4% royalty mineral interest and those don’t bear any expenses and so the cash flow goes directly to our bottom line pre-tax. Once our 25% reversionary working interest kicks in which should be around 2013 or ’14, depending on oil price and production ramp up, we’ll than pay our 25% share of operating expenses while receiving an additional 20% of the revenue. So we’re very pleased that the field development continues to progress ahead of the revised schedule from last fall and before our fiscal year end which should support a reclassification of a significant portion of those probably reserves at Delhi to improve category. Elsewhere we’re continuing our fiscal 2010 capital plan of testing our South Texas Neptune oil project and our Oklahoma shallow gas shale project while conducting a number of work overs in the Giddings Field in Central Texas for enhancement of production. In Oklahoma, our focus during the quarter has been on testing the productivity of the primary Woodford Shale and the secondary Caney Shale in Wagoner County to determine the best completion practice and development plan. We’re testing the Woodford in two wells, one with a low level frac and the second without any frac at all. We’re testing two types of frac treatment of the Caney Shale and our third well. Now, all of our gas production right now is being flared during these tests and not being sold. The test of the low level frac of the Woodford which is at a depth of about 1,600 feet in our Henry well which is located at the western end of the leasehold, that well has already exceeded the 80 mcf a day target production rates that set at the beginning of the project some time ago. Read the rest of this transcript for free on seekingalpha.com